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US agency creates Jones Act enforcement division

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Washington — Amid increased pressure from the US maritime industry to boost Jones Act enforcement, the US Customs and Border Protection has created a new division of enforcement for the nearly century-old law.

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CBP's Office of Field Operations has created the National Jones Act Division of Enforcement, which has a mission to "assist CBP and industry partners on issues concerning coastwise trade, with the goal of being a clearinghouse for all coastwise trade issues," according to a July 15 notice from Vernon Foret, director of the Area Port of New Orleans.

The division, known as JADE, will be headquartered in New Orleans and will include a staff of Jones Act experts, Foret wrote.

"The JADE will work in partnership with industry stakeholders in the enforcement of the Jones Act, along with all other coastwise trade laws," Foret wrote, adding that the Jones Act was the "foundation" of US maritime policy.

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There are few public details on this new division and their future work outside of Foret's notice. Katrina Skinner, a CBP spokeswoman, declined to comment beyond the announcement.

But sources said the JADE was likely created in response to lobbying from the US maritime industry, a fierce defender of the Jones Act, and may lead to more Jones Act enforcement cases.

"This plainly is the outgrowth of industry lobbying to get CBP to take Jones Act enforcement more seriously," said Charlie Papavizas, a partner at Winston & Strawn and chair of the firm's maritime practice. "But, how it will relate to existing technical processes for determining what the Jones Act covers is not spelled out."

The creation of the division follows months of pressure by the US maritime industry to bolster support for the already-popular Jones Act in both Congress and within the Obama administration.

In December 2015, the $1.1 trillion omnibus bill included language calling on CBP to better enforce the Jones Act.

"CBP is urged to levy penalties, as appropriate, for previously documented violations of the Jones Act; establish specific timeframes for internal review and actions; continue working with the Offshore Marine Service Association to investigate potential violations; and dedicate adequate resources to vigorously enforce the Jones Act on the Outer Continental Shelf," the explanatory statement said.

At the time, sources said it was unusual for OMSA, a trade association, to be mentioned by name in the bill.

Aaron Smith, OMSA's president and CEO, said Wednesday that JADE was a effort by CBP to go after "significant violations" of the Jones Act, though he declined to discuss the details of these violations.

"The establishment of JADE is a recognition that there are serious violations of the Jones Act occurring on a routine basis on the OCS, and CBP intends to correct the situation with aggressive, consistent enforcement of the law, as the statue requires," Smith said.

The Jones Act, which requires vessels transporting goods between US ports to be US-flagged, US-built and majority US-owned, is strongly backed by the US maritime industry and has wide-ranging, bipartisan support in Congress, which has previously refuted any efforts to weaken it.

US East Coast refiners have complained that the Jones Act puts them at a competitive disadvantage to refiners in Canada and Europe, and the American Fuel and Petrochemical Manufacturers, the industry's chief lobbying group, has called reform of the Jones Act a key policy goal this year.

Last month, Representative Gary Palmer, an Alabama Republican, unsuccessfully attempted to attach a Jones Act waiver to a bill to restructure Puerto Rico's $70 billion debt, and Representative Mike Pompeo, a Kansas Republican, said in March that he was launching an effort to repeal certain elements of the law.

The capacity of Jones Act-compliant tankers and large articulated tug barges has increased by about 7.5 million barrels, to 22.5 million barrels, since 2012, according to a new analysis by David St. Amand, president and founder of Navigistics Consulting. Another 4.5 million barrels, or 17 Jones Act tankers and large barges, are expected to be added by early 2018, according to the analysis, which was released by RBN Energy on Tuesday.

--Brian Scheid, brian.scheid@spglobal.com
--Edited by Annie Siebert, ann.siebert@spglobal.com