Proposed Cbp Rule Changes

Proposed CBP Rule Changes Would Severely Damage the Offshore Oil and Gas Industry Notice of Proposed Ruling: On July 17, 2009, U.S. Customs and Border Protection (“CBP”) published a formal Notice of Proposed Modification and Revocation that would overturn over decades of precedent under the Jones Act, a statute first promulgated in 1920 requiring the use of U.S.-built, U.S.-flagged vessels in the “coastwise” transportation of merchandise in U.S. waters, including the outer continental shelf. Specifically, the CBP’s highly technical proposal would reverse customs rulings dating back to 1976 on what constitutes “vessel equipment” as opposed to “merchandise.” Under the proposed changes, much of the highly specialized undersea infrastructure used in deepwater extraction would become subject to Jones Act restrictions, requiring the exclusive use of U.S. “coastwise qualified” vessels. Timing: The proposed changes are unnecessarily being rushed through. Comments must be submitted to CBP within 30 days, or by August 17, 2009. Under the law, CBP is required to publish a final ruling within 30 days after the comment period ends. The ruling would take effect 60 days after that. Impact: U.S. companies conducting deepwater oil/gas operations rely on some of the world’s most sophisticated and expensive vessels for highly specialized operations such as subsea installation and construction support, pipe/umbilical laying, and maintenance of seafloor facilities. Such vessels take years and huge investments to design, build and man. The vast majority of these are foreign-flagged vessels. For deepwater support, U.S.-flagged vessels represent less than 20% of current Gulf of Mexico capability. In seeking to protect a fleet of U.S. vessels that does not currently exist, the CBP proposal would impose virtually overnight a business model that is riskier, less robust, and less efficient than that which a competitive industry has developed over the last four decades. It would have far-reaching and highly damaging consequences for the offshore oil and gas industry and ultimately the U.S. economy and national security interests. Essentially, it would significantly curtail industry’s ability to explore and produce oil and gas in the Gulf of Mexico, increasing reliance on imported oil and exacerbating the U.S. trade balance, during the most severe recession in decades. Furthermore, the proposed changes are protectionist in nature and thus run counter to U.S. free trade policies. They could well give rise to retaliation, particularly in oil and gas producing countries where U.S. companies are active. Request: Interested parties should make their comments known before August 17, 2009. Please contact your elected Representatives and Senators to urge them to contact CBP, and comment directly to CBP. • Contact information for members of Congress is available online, for example at: http://www.congress.org/congressorg/home • CBP will receive comments at the following address: U.S. Customs and Border Protection Office of International Trade, Regulations and Rulings Attn: Trade and Commercial Regulations Branch

799 9th Street, N.W. Washington, D.C. 20229. Interested parties should: (1) insist that CBP extend the comment period to at least 90 days; (2) urge CBP to reconsider its action based on years of precedent; and (3) take other action as required to protect the offshore oil and gas industry from the crippling effects of the proposed action.