The Future of American Offshore Wind: A Foreign Flag Armada is Approaching U.S. Shores

Navigating Legal and Commercial Seas for U.S. Jones Act Vessel Owners

The American offshore wind industry support vessel fleet is currently navigating turbulent waters due to an approaching armada of foreign-flagged vessels poised to perform construction support roles in U.S. coastal waters this spring in place of available U.S. vessels which, with their American crews, will now sit idle—a stark deviation from the commitments made to U.S.-owned and crewed vessels, the U.S. merchant marine industry, and the American public. This troubling development arises from improper reliance on a Customs and Border Protection (CBP) ruling, HQ H326258 (Ruling), issued on September 15, 2023. While there is no dispute regarding the Ruling itself, there is a growing perception amongst U.S. Jones Act vessel owners that the ruling is being misinterpreted by some developers and particularly by a number of foreign-flagged vessel operators. Based on these misinterpretations of the Ruling, foreign vessel owners have become emboldened to undertake specialized tasks critical to offshore wind development, such as construction support, acoustic monitoring, seabed clearance, and the transportation and deployment of acoustic mitigation systems to protect marine life. The first large scale windfarm construction started offshore in the U.S. N.E. during 2023 which saw a trickle of foreign flag vessels arriving in U.S waters.  One such  foreign-flagged vessel, the Union Bear, was seemingly willing to test the Jones Act and its enforcement and in doing so may have set a misguided precedent. Now, in 2024, as the Union Bear is set to return with an accompanying Armada, that trickle is set to become a torrent.

A turning point for U.S. N.E. vessel owners: The 2023 Ruling, related to Revolution Wind project now in development off the U.S. N.E. coast and affecting future U.S. offshore wind developments, has profound implications for the Jones Act—long-standing U.S. legislation established to protect American maritime jobs and commerce by restricting the transportation of goods between U.S. ports and points exclusively to U.S.-flagged vessels. The Ruling, like all such rulings, is specific to the party making the request, the project and the operational facts as presented in the ruling request; however, other foreign companies and vessel operators are apparently relying on the Ruling in a misplaced belief that CBP has broadly permitted foreign vessels to operate in violation of the Jones Act, allowing foreign vessels to usurp  American vessel owners and workers. These misinterpretations represent a significant blow to the Jones Act's integrity, putting at risk American maritime jobs - and American vessels that were widely promised for U.S. offshore wind construction projects, and indirectly diverts local, state and federal economic benefits that were intended to support the domestic industry.

Hidden costs to the U.S. of foreign flag vessels:  The disparity in operating costs, including wages between American and foreign vessels, has created an unfair playing field where U.S. ship owners struggle to compete due to higher financial obligations, such as taxes and healthcare costs not paid by foreign owners and their crews. The resulting scenario is not merely a loss of jobs but also a missed opportunity for U.S. tax revenue collection, critical for the nation's economy, as the much-needed income from U.S. maritime industry is poised to fill the coffers of overseas foreign vessel owners and developers.

U.S. vessel owners support the CBP decisions: The CBP role is critical to U.S. interests. The issue with the Ruling from last September is not with the underlying principle in the Ruling itself but with the interpretation of the Ruling by some developers and foreign owners. CBP has long recognized that despite the unmistakably broad meaning of “merchandise” under the Jones Act, which by law includes even “valueless material”, certain “vessel equipment” is not considered “merchandise” subject to the Jones Act. The Ruling concluded that certain equipment installed on a foreign vessel at a foreign port, transiting from a foreign port to a “pristine” location on the U.S. Outer Continental Shelf (OCS) to operate that equipment, and thereafter directly returning to a foreign port, constituted “vessel equipment” that therefore could be transported on a foreign vessel. That operation, as described by the requestor to CBP and outlined in the Ruling, would indeed be permissible by a foreign vessel in accordance with long standing Jones Act interpretations.

The issue with the CBP Ruling is how foreign owners and operators have misunderstood it, or overtly misapplied it, to a host of operations and vessel activities well beyond the facts described in the Ruling. Specifically, some foreign owners and operators have assumed that because CBP concluded that the “bubble curtain” equipment and operations described in the Ruling constituted “vessel equipment”, that a broader array of sound attenuation equipment and operations not described in the Ruling are nevertheless permissible on foreign vessels. Their assumption is misplaced as it ignores the principle that each application stands on its own facts and merits. For example, in subsea acoustic mitigation, the vessel in use will often transport, unload, and install certain Subsea Hose (SH) Components that will be used in connection with sound attenuation activities during monopile installations. When those SH components are installed onto the seabed, the vessel performing this work will disconnect and leave the SH components in place for many days and at various locations before returning to collect them. These operational facts and circumstances are starkly different from the operations that instead proposed to retain the SH components on board or attached to the vessel at all times like a survey vessel deploying and retracting an ROV umbilical.

Another point for future consideration is the fact that pristine (untouched) seabed is not a point or place on the OCS for purposes of application of the Jones Act, but in reality it is practically impossible for all of the locations on the U.S. OCS to be “pristine” points on the U.S. OCS during the offshore wind operations involved.  In many cases the seabed will have been prepared in advance with scour protection, dredging and boulder removal operations.  In addition, once wind turbine monopile installation starts and after installation is completed on the OCS, a point or place on the OCS will have been established, and it is after that occurs when vessels would remove previously unloaded SH components and load them back on board—activity that would require U.S. flag coastwise qualified vessels.  Finally, unlike the exclusive use of foreign ports in the project off the Northeast Atlantic coast as described in the Ruling, other foreign operators and offshore wind projects in the mid-Atlantic are planning to load and unload in U.S. mid-Atlantic ports. These operational facts and circumstances are starkly different from the operations described to CBP in the Ruling.

The response by U.S. operators: Jones Act coastwise vessel operators with the knowledge of a year of operations in U.S. offshore wind throughout 2023, have submitted new, far more comprehensive, and well evidenced ruling requests to CBP in relation to different offshore wind farm projects. One such ruling request made this winter pertains to transportation of sound attenuation components to and from U.S. ports.  This ruling request seeks clarification of compliance alternatives for offshore wind projects, and whether both U.S. Jones Act vessels and foreign vessels can be used in clearly defined roles such as transporting SH components between coastwise points, or whether only U.S. flagged and crewed vessels can undertake these roles. Other details, such as the unloading and loading of components at coastwise points, not pristine seabed, use of U.S. ports, and other highly detailed aspects of operations have been presented to CBP in pending ruling requests and are anticipated in forthcoming ruling requests on related operations. 

Implications for many scopes and vessel types: CBP ruling requests and resulting project-specific rulings have huge implications for U.S. Jones act vessel operators for scopes such as bubble curtain work, and movement of objects, boulders, materials debris and cargo for offshore wind farm projects on the U.S. OCS. Further requests are seeking rulings on dredging operations, subsea boulder removal and the use of certain dredging tools for route and site clearance such as pre-lay grapnel run (PLGR) work. These requests are intended to safeguard the future of American maritime operations by requesting urgent clarity and enabling enforcement of the Jones Act, ensuring that American vessels are given precedence in offshore wind projects where U.S. law mandates it, seeking a level commercial playing field where it is otherwise impossible for U.S. owners to compete with low cost imported foreign vessels that do not carry the same U.S. tax and regulatory burdens, and ensuring that the previous decisions based on loose or misleading information do not provide a basis for an influx of non-US flag vessels with foreign crews.

There is clear economic and commercial rationale for preferring U.S. vessels in domestic waters. By providing full disclosure on the scope of their projects and their vessel's intended uses, U.S. vessel owners are seeking clear rulings in offshore wind which will uphold the principles of the Jones Act, ensuring that U.S. subsidies for offshore wind recirculate within the domestic economy and contribute to the nation's tax base.

Foreign Owners Beware: If the foreign flag vessels come to U.S. shores this spring as planned, there is a significant risk associated with the CBP's upcoming rulings. As CBP has made clear in the past, especially with regard to determinations involving “vessel equipment,” such determinations are made on a “case-by-case” basis and operators are not entitled to rely on rulings issued to others.  Not even a party obtaining a ruling is entitled to rely on it if actual operations deviate from the operations described to CBP.  Parties involved with the Revolution wind project should take note:  foreign-flagged vessels in U.S. waters and on the U.S. OCS undertaking tasks that are deviating from the operations described in a ruling—if one has even been obtained—will be operating illegally as soon as they commence work. Given the likelihood that CBP will issue more specific clarifying rulings on requests now pending, which relate to projects commencing this spring and thereafter, non compliance and breaches of Jones Act law could lead to an immediate order to cease operations, potential fines and enforcement actions for the entire period of non-compliant vessel operations, vessel detentions, and other penalties. These scenarios would disrupt any ongoing wind developments involving non-compliant vessels or operations, could delay projects, and could trigger significant public relations and commercial fallout for developers, the operator, and the wind projects they are working.

This should be fair warning to the foreign flag owners and wind farm developers alike that a fair and equitable decisions need to be taken now by the developers this spring about the flag of the vessels they employ this year. It is hoped that at least the risk averse and careful developer will reconsider their foreign flag vessel charters, and the foreign owners reconsider the risks potentially breaching U.S. law, before the 2024 construction season opens, while the outcome of these new applications are decided.

Can developers and foreign flag owners take the risk in 2024? Developers and foreign vessel operators must consider whether they can afford to take the chance of such potential repercussions. The intended arrival on U.S. shores is having an impact already as U.S. vessel contracts are being cancelled in favor of foreign flag vessels.  The interruption of their ongoing developments and the considerable fines would have severe commercial implications on their offshore developments, and this could, and is more likely than not to be mid-project in 2024, not to mention the tarnish to their reputations in the U.S. Hence, there is an expectation that developers will employ Jones Act-compliant U.S. vessels until a definitive CBP rulings are issued, thereby mitigating legal risks and demonstrating a commitment to U.S. maritime law, local content and the U.S. marine industry.

Pivotal moment for U.S. vessel owners and crews: In this pivotal moment, the industry must make a choice; continue down a path that undermines American maritime sovereignty or pivot towards a future that strengthens American maritime commerce and supports the growth of a domestically-fuelled offshore wind industry. The hope is that, in the face of these challenges, developers and operators will choose to uphold the Jones Act, protecting American interests and securing a sustainable and prosperous maritime future.