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Marine Log

June 12, 2008

Jones Act rebuild rulings under fire

Don't be too surprised if Congress further tightens the rules on what does and what does not constitute rebuilding of a Jones Act vessel. Any such legislation will also likely require much more transparency in the process by which the Coast Guard makes such determinations.

And if either Matson Navigation or Seabulk Energy come asking for waivers should they lose out in current legal proceedings, they can't expect too much Congressional sympathy.

That's the take-away after the issue came under the spotlight at a hearing held yesterday by the Subcommittee on Coast Guard and Maritime Transportation of the House Transportation and Infrastructure, at the request of Congressman Gene Taylor.

The issue is, of course, a hot one because of two cases in which there have been legal challenges to the Coast Guard's determination that substantial work carried out in China did not constitute rebuilding in terms of the Second Proviso of the Jones Act.

The ships in question are Matson Navigation's Mokihana, converted from a containership to a container Ro/Ro and Seabulk Energy Transport, Inc.'s Seabulk Trader, which received a new inner hull in China.

An extensive backgrounder on Jones Act rebuilds and these two cases in particular can be accessed here.

Both those cases are still the subject of legal proceedings. That led both Matson and Seabulk to decline to testify at yesterday's hearing--while the Coast Guard declined to testify on the specifics of the two particular cases, saying they were now the province of the Justice Department.

That led Transportation Committee Chairman James L. Oberstar to say: "I am very disappointed that Seabulk and Matson Navigation declined our invitation to testify today but chose to submit statements for the record. While I understand their concern about pending litigation, they should have been prepared to talk about nature of the work they had done on their vessels in China and the impact on their companies if their coastwise endorsements are revoked. Without that testimony, it will be very difficult for the Committee to grant a Jones Act waiver if their coastwise endorsements are revoked."

Subcommittee Chairman Elijah Cummings said the panel had invited both companies to testify and that "without their testimony, I believe that it will be very difficult for the Subcommittee to decide on any statutory waivers of the Jones Act requirements that might be proposed for these companies if they should need them as a result of current court cases."

In his opening statement, Chairman Cummings said that an overarching issue is the lack of transparency in the Coast Guard's assessment process.

"Shipyards and vessel owners must continually submit Freedom of Information Act requests to the Coast Guard to find out what letter opinions the service has issued because the Coast Guard does not post these letters on the internet," he noted. "In contrast, the Customs and Border Protection agency posts its letter rulings regarding the transportation of merchandise in the Jones Act trade on the internet so that the maritime industry can see their current interpretations."

Once someone has received a Coast Guard letter ruling, said Chairman Cummings, "it is difficult, if not impossible, to obtain the background information regarding how the Coast Guard came to the conclusion expressed in the letter. This makes it difficult for the Coast Guard to obtain the views of both sides of an issue before it makes a decision."

Chairman Cummings called the issues examined at the hearing "complex, but they are critical to ensuring that the provisions of the Jones Act are appropriately enforced and that all of the vessels certified for the coastwise trade are competing on a level playing field."

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