Comment and analysis by Reed Smith lawyers on the latest developments in the shipping industry
International obligations: climate change
At a United Nations climate conference in late 2023, participants championed the successes of climate commitments in previous years. Nevertheless, there was consensus that not enough action has occurred to enable participants to meet the goals of the Paris Agreement in 20151. This agreement set ambitious goals relating to…
The Jones Act is a challenge for the LNG industry in the United States. The Jones Act requires that all vessels used to transport merchandise between points in the United States satisfy certain requirements: to be Jones Act compliant, vessels must be U.S.-built, U.S.-owned, U.S.-flagged, U.S.-operated and U.S.-crewed, subject to certain limited exceptions.
No Jones…
Whilst there is much in the news at the moment about the relaxing of the Jones Act in the aftermath of the recent (and on-going) hurricanes, we consider the financing risks of vessel modification outside the United States:
The United States Jones Act limits the transportation of merchandise by water between points in the United States in vessels built in the United States, documented under the U.S. laws, and owned by the U.S. citizens. Any vessel which is later rebuilt outside the United States will lose its coastwise trade endorsement.
A vessel is deemed to be built in the U.S. only if all major components of the hull and superstructure are fabricated in the U.S. and the vessel is entirely assembled in the U.S. (46 CFR 67.97). Prior to any work being performed on a U.S. flag vessel eligible for coastwise trading, a vessel owner must submit an application to the U.S. Coast Guard National Vessel Documentation Center (the “NVDC”) seeking determination whether the proposed work would jeopardize the vessel’s coastwise trade eligibility. NVDC regulations at 46 C.F.R. § 67.177 set out a comprehensive scheme for determining whether work done abroad constitutes foreign rebuilding, namely, the two-pronged test – the “major component test” (46 C.F.R. § 67.177(a)) and the “considerable part test” (46 C.F.R. § 67.177(b)). Under a recent Foreign Rebuild Determination Letter by the NVDC, a third element – the “cumulative effect test” – has been added to the other two tests.
Continue Reading Financing risks of vessel modification outside the United States
