The Jones Act is well known in maritime circles and continues to be a matter of controversy well over a century after it was first passed.
Passed into law in the 19th century in order to guarantee US national security by providing US shipbuilders with a monopoly in the construction of vessels permitted to trade domestically, the Jones Act has ferocious critics and equally vehement defenders in the US.
However, despite the law’s long existence, there continue to be grey areas, one of which is what precisely is meant by the term “US-built”. In the 19th century this might have been seen as an obvious differentiator, but in a global trading world, things are more complex.
Constantine (Charlie) Papavizas, partner in the international law firm of Winston & Strawn LLP and chair of the firm’s maritime practice group, has covered a recent court case that tested the parameters of the condition.
US Court of Appeals for the Fifth Circuit case of Diamond Services Corp v Curtin Maritime Corp heard that US Coast Guard regulations provide a two-part test to determine whether a vessel constructed in the United States meets the “US-built” test.
- First, “all major components” of the vessel’s “hull or superstructure” must be “fabricated in the United States.”
- Second, the vessel must be “assembled entirely in the United States.”
The USCG defines a “major component” as a “new, separate and completely-constructed unit” weighing more than 1.5% of the vessel’s steelweight. The USCG refers to excluded items not being part of the hull or superstructure as “outfitting.”
The USCG defines the “hull” as “the shell, or outer casing, and internal structure below the main deck which provide both the flotation envelope and structural integrity of the vessel in normal operation.” It defines the “superstructure” as “the main deck and any other structural part above the main deck.”
This means that items such as the propeller, propeller shaft, rudder, and rudder stock are not considered components of the “hull or superstructure.” Similarly, the USCG has consistently held that installations which are not structurally integral to the vessel’s hull or superstructure, such as portable modules for accommodations and auxiliary machinery are exempt.
The Diamond Services case started with a USCG determination issued to Curtin Maritime in 2019 regarding the proposed construction of a dredge in a US shipyard. The Coast Guard has a process by which it will provide advance determinations whether a vessel will be considered “US-built” with incorporated foreign manufactured items.
The determination addressed, among other things, the addition of foreign manufactured spuds (a steel post mounted vertically on the barge which when lowered can be used to anchor or lift the vessel) and a crane. The USCG concluded that the spuds and crane, both being removable, were “outfitting”. It believed this because the vessel would “remain a complete and intact vessel and will be fully capable of operating as a vessel without the spuds and crane.”
When the vessel was complete, the USCG issued to the owner a Certificate of Documentation (CoD) with a coastwise endorsement, which made it fully eligible for the US domestic maritime trade.
Diamond Services sued several defendants in June 2022, including the US Coast Guard, alleging that the Coast Guard’s issuance of the CoD was arbitrary and capricious.
Diamond Services argued, among other things, that the crane was “structural” and a “necessary part of the dredge” and that the use of the term “outfitting” had no statutory predicate.
The Fifth Circuit panel denied the Diamond Services claim. It affirmed the District Court on April 17th 2024, finding that the USCG’s interpretation was reasonable, even though the US build regulation being interpreted was ambiguous as to spuds and cranes.
The USCG determination that the spuds and crane were not part of the hull or superstructure of the vessel therefore prevailed.