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Lawmakers told foreign ships threatening US maritime sector

Smith asserts offshore industry is particularly vulnerable to Jones Act threats. Credit: Jim Allen/FreightWaves

Many of the laws governing American ships — considered some of the most stringent in the world — are not being applied to foreign vessels operating in U.S. waters, a spokesman for the U.S.-flag shipping sector has alleged.

Testifying before a congressional committee in Washington, D.C., on Nov. 14, Aaron Smith, president and CEO of the Offshore Marine Service Association (OMSA), asserted U.S Customs and Border Protection (CBP), which regulates cargo shipped to the United States, has “created an unlevel playing field” that favors foreign vessels and foreign ship crews that work in the U.S. offshore oil and gas industry.

“Foreign vessels are not required to report the same level of incident data that we have to report to the U.S. Coast Guard,” Smith told the Coast Guard subcommittee of the U.S. House Transportation and Infrastructure Committee. “Additionally, foreign vessels employ foreign nationals who may not follow the same safety standards as U.S. mariners and are paid a fraction of what OMSA members pay their U.S. mariners, creating a lucrative cost advantage for these vessels.”

Smith’s testimony addressed in large part a recent proposal by the Trump administration to revoke past guidance on how the Jones Act is interpreted, which could potentially further expose the U.S. offshore industry to foreign shipping. The Jones Act requires that commercial ships moving between two points in the U.S. be owned, flagged and built in the United States and crewed by American citizens.

Smith explained during the hearing that starting in 1976, CBP began issuing private correspondence to foreign vessel owners requesting a determination on whether a certain offshore activity violated the Jones Act. Over the years, CBP issued roughly 160 letter rulings, he said, which essentially opened loopholes to the Jones Act. However, “none of these exceptions are found in the law,” he contended.

He pointed out that CBP subsequently acknowledged this and twice attempted to revoke the letter rulings and close the loopholes that they caused, in 2009 and in 2017, but did not follow through. “In 2017, they said they received a lot of emails [against revoking the letter rulings] and said, ‘We need to study this.’ I didn’t know you could not enforce the law because you got a lot of emails.”

Energy companies participating in the offshore oil and gas industry — and, more frequently, offshore wind off the U.S. East Coast — are against efforts to protect the Jones Act, claiming that the law raises shipping costs by locking out foreign competition and ultimately harming consumers. The Cato Institute, which has campaigned against the law for years, recently published a white paper arguing that it also undermines national security.

But Smith pointed out that foreign crews working on foreign vessels are a security risk. “Many come from non-allied countries such as Russia and China, and are issued five-year visas with little oversight,” he said. “Without proper enforcement of the Jones Act, we cede [offshore] work to foreign vessels which do not comply with the same safety standards as U.S. vessels or the same standards we have for environmental or security laws.”

Lawmakers at the hearing did not address Smith’s concerns regarding the risk foreign vessels pose to the U.S. maritime sector. Instead, Bob Gibbs, the subcommittee’s ranking Republican from Ohio, asked how Congress could “fix” the problem of foreign ships importing liquefied natural gas (LNG) into U.S. markets, as opposed to domestically produced LNG transported on U.S.-flagged ships.

“It’s my understanding…there is no extra capacity in the [U.S.] export terminals,” Smith responded. “Once there is, we will have the vessels capable of carrying that.”

John Gallagher

Based in Washington, D.C., John specializes in regulation and legislation affecting all sectors of freight transportation. He has covered rail, trucking and maritime issues since 1993 for a variety of publications based in the U.S. and the U.K. John began business reporting in 1993 at Broadcasting & Cable Magazine. He graduated from Florida State University majoring in English and business.