Long-term care facilities, embattled by rising costs and potential Medicaid cuts, are seeing some relief on the horizon following a recent federal court ruling that struck down portions of the Centers for Medicare & Medicaid Services’ (CMS) looming staffing mandate (final rule). The now-vacated provisions of the final rule would have imposed significant staffing requirements on long-term care facilities already strapped for cash and facing staffing challenges.
In American Health Care Association, et al. v. Robert F. Kennedy, Jr., et al., the Northern District of Texas vacated two key provisions of the staffing mandate, which were set to go into effect over the next several years, with the first implementation date being in May 2026:
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24/7 RN Staffing: Facilities will no longer be required to have a registered nurse (RN) on-site 24 hours per day, seven days per week, to provide direct resident care.
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Minimum Staffing Ratios: Long-term care facilities will no longer be required to provide a minimum of 3.48 hours per resident per day (HPRD) in total nurse staffing, including 0.55 HPRD for RNs and 2.45 HPRD for nurse aides.
While remaining portions of the final rule are still set to go into effect, the two requirements vacated by this decision are expected to significantly reduce anticipated staffing burdens on long-term care facilities. However, an appeal of the decision is still a possibility, meaning long-term care facilities should not fully abandon their preparations for the final rule.
Court’s Reasoning and Implications
The court found that CMS had overstepped its statutory authority, asserting that the final rule imposed mandates inconsistent with the requirements laid out by Congress.
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Regulatory Overreach: While acknowledging the importance of improving staffing in long-term care facilities, the court emphasized that agencies must act within the bounds of authority explicitly granted by Congress and cannot implement sweeping regulations without clear statutory backing.
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Conflict With Congressional Mandates: The court determined that the 24/7 requirement contradicted existing statutory provisions, which require RN services for at least eight consecutive hours daily, seven days per week. Because existing law sets the floor at eight hours per day, and the 24/7 requirement would increase the floor to 24 hours per day, the court found this to be an overreach. Since the inception of Medicare and Medicaid in 1965, Congress has maintained control over the framework governing long-term care, standing firm at the floor being eight hours per day. The court was concerned that given this context, CMS was attempting to legislate from the agency and subvert Congress’ intent.
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No One-Size-Fits-All Approach: Similarly, the court found the HPRD thresholds to be problematic because they imposed uniform staffing ratios that failed to account for the unique needs of each facility. Congress requires long-term care facilities to provide services that are individualized to be sufficient to meet the needs of residents, which calls for a more flexible, case-by-case approach.
This decision was heavily influenced by the Supreme Court’s ruling in Loper Bright Enterprises v. Raimondo, which underscores the principle that federal agencies may only exercise authority clearly delegated by Congress. In Loper Bright, the Court limited deference to agency interpretations of ambiguous statutes — marking a shift toward stricter judicial oversight of regulatory action.
Conclusion
The vacating of these provisions of the CMS staffing mandate, coupled with the judicial reasoning grounded in Loper Bright, highlights a critical shift in how courts view agency authority. While the decision not to implement these provisions may alleviate some immediate regulatory pressures on long-term care facilities, these facilities continue to face significant staffing challenges that can directly impact facility quality of care and expose long-term care facilities to government inquiries and investigations.
Therefore, long-term care facilities should still address staffing issues by exploring innovative recruitment and retention strategies, investing in staff training and development, and fostering a supportive work environment. In addition, long-term care facilities should continue to monitor activity in this case, in the event this ruling is challenged by an appeal.
On April 29, President Trump issued a new proclamation, “Amendments to Adjusting Imports of Automobiles and Automobile Parts into the United States,” modifying Proclamation 10908 “Adjusting Imports of Automobiles and Automobile Parts Into the United States,” which imposed a 25% tariff on imports of passenger vehicles (sedans, sport utility vehicles, crossover utility vehicles, minivans, and cargo vans) and light trucks (collectively, automobiles) and certain automobile parts under Section 232 of the Trade Expansion Act of 1962, as amended (the 25% Automobile/Part Tariff). The new action maintains the 25% Automobile/Part Tariff, but introduces a limited rebate mechanism for imported parts — an “offset” — based on final vehicle assembly in the U.S. On the same day, an accompanying Executive Order, “Addressing Certain Tariffs on Imported Articles,” (the Order) was issued to provide guidance that “tariff stacking” would not be implemented for imported products that could be subject to multiple tariff regimes listed under Section 2 of the Order. These recent actions suggest that the Trump administration is responsive to certain types of industry pressure and may continue to roll out case-by-case exceptions or clarifications over time.
Summary of Proclamation
- Tariff Levels Unchanged: Imported automobiles (effective April 3, 2025) and certain auto parts identified in Proclamation 10908 (starting May 3, 2025) remain subject to the 25% Automobile/Part Tariff.
- New Offset for U.S. Assembly: For automobiles assembled in the U.S., manufacturers can claim a partial rebate on the 25% Automobile/Part Tariff paid on imported automobile parts, calculated based on the aggregate value of their U.S.-assembled vehicles. Specifically, eligible manufacturers can offset 3.75% of the aggregate Manufacturer’s Suggested Retail Price (MSRP) of all automobiles assembled in the U.S. between April 3, 2025, and April 30, 2026, and 2.50% of aggregate MSRP of all automobiles assembled in the U.S. between May 1, 2026, to April 30, 2027. These MSRP-based offset rates in effect allow manufacturers to obtain rebates based on the application of the 25% Automobile/Part Tariff on automobile parts to 15% of a vehicle’s value (in the first year) and 10% of a vehicle’s value (in the second year). In other words, imports of automobile parts constituting above 15% (or 10%) of a vehicle’s value will not be able to benefit from this offset, providing a continued incentive for domestic sourcing (which increases with time). All other imports remain subject to the full 25% Automobile/Part Tariff, including assembled vehicles.
- Eligibility Requirements:
- Only automobiles that undergo final assembly in the U.S. are eligible to generate an offset.
- This offset is granted to manufacturers and must be allocated to importers of record (e.g., parts suppliers) authorized by that manufacturer.
- The offset cannot exceed the total tariff liability for the manufacturer’s automobile parts under Proclamation 10908 (25% Automobile/Part Tariff). If the offset amount is greater than the tariff liability, the excess cannot be used to offset other tariffs. The relief is strictly limited to the automobile parts tariff liability under the 25% Automobile/Part Tariff. Importers who submit false claims or claim more offset value than authorized will face stiff penalties.
- Administration: By May 29, the U.S. Department of Commerce (Commerce) will establish a process for manufacturers to apply for an import adjustment offset amount. Manufacturers will be required to submit (1) details on the number of U.S.-assembled automobiles and their production locations; (2) projected tariff costs for imported automobile parts under Proclamation 10908, split by direct and supplier costs; (3) the requested offset amount; (4) a list of eligible importers of record and their allotted offset amounts; and (5) a signed certification verifying the accuracy of the submitted information. After verifying the submission, Commerce will approve or deny the application and will notify U.S. Customs and Border Protection (CBP) of approved applications. CBP will subsequently apply the offset to the importers’ tariff obligations, which will apply retroactively to relevant import entries.
Tariff Stacking
The Order clarifies that the following tariffs are not intended to have a cumulative or “stacking” effect when they apply to the same imported good: (1) the 25% Automobile/Part Tariff; (2) existing fentanyl and migration International Emergency Economic Powers Act (IEEPA)-related tariffs issued under Executive Orders 14193, 14197, and 14231 with respect to goods from Canada, and Executive Orders 14194, 14198, and 14227, with respect to goods from Mexico (the Fentanyl/Migration IEEPA Tariffs); and (3) steel and aluminum articles subject to duties imposed pursuant to Section 232 of the Trade Expansion Act of 1962, as amended and Proclamations 9704, 9705, 9980, 10895, and 10896 (the 25% Steel/Aluminum Tariffs, and together with the 25% Automobile/Part Tariff and Fentanyl/Migration IEEPA Tariffs, the Section 2 Tariffs).
To address potential overlaps, the Order establishes the following procedure for determining which tariff will apply when a product is subject to more than one of the Section 2 Tariffs:
- Goods subject to the 25% Automobile/Part Tariff will not be subject to the Fentanyl/Migration IEEPA Tariffs or the 25% Steel/Aluminum Tariffs.
- Good subject to the Fentanyl/Migration IEEPA Tariffs will not be subject to the 25% Steel/Aluminum Tariffs.
- Goods subject to the 25% Steel/Aluminum Tariffs may be subject to both aluminum and steel tariffs if all relevant criteria for each are met.
Importantly, goods subject to any of the Section 2 Tariffs may still be subject to additional applicable duties, including:
- General duty rates under the Harmonized Tariff Schedule of the United States (HTSUS);
- Tariffs imposed under Section 301 of the Trade Act of 1974;
- Tariffs placed on all Chinese imports under Executive Order 14195, “Imposing Duties To Address the Synthetic Opioid Supply Chain in the People’s Republic of China,” as amended;
- Antidumping and countervailing duties; and
- Any other applicable fees, taxes, or exactions.
The Order offers significant relief to importers by preventing the stacking of Section 2 Tariffs on the same good — except that steel and aluminum tariffs may still be combined where applicable. Furthermore, these three tariffs are exempt from reciprocal tariffs imposed pursuant to Executive Order 14266, “Modifying Reciprocal Tariff Rates To Reflect Trading Partner Retaliation and Alignment.”
The provisions of the Order apply retroactively to all entries of covered merchandise made on or after March 4, 2025. Importers may request refunds, which will be processed pursuant to CBP standard procedures. CBP must implement these changes, including updates to the HTSUS, no later than May 16.
Industry Impact
- Original equipment manufacturers (OEMs) stand to benefit if they increase U.S. assembly; they can lower their net tariff burden on imported parts, but only up to the stated maximum amount, providing an incentive for domestic sourcing that increases with time.
- Automakers without U.S. manufacturing plants still face the full 25% Automobile/Part Tariff, risking competitive disadvantage.
- Automobile parts suppliers should coordinate with OEMs to become designated importers and explore localizing production.
Recommendations for Companies
- OEMs should immediately assess U.S. assembly output and apply for offset credits. Companies should act quickly to document their U.S. production and claim the offset, while also preparing for continued tariffs on non-qualifying imports.
- Suppliers/importers should coordinate with OEMs to ensure designation under this program and maintain accurate importer-of-record documentation.
- All parties should monitor Commerce regulations and ensure compliance with offset limits and CBP procedures.
- Companies should review exposure to other tariffs and apply the “no stacking” rule where applicable to minimize duties.
Conclusion
This alert is intended only as a high-level summary of recent developments and is not a substitute for specific legal or tax advice. Things are rapidly changing by the day and hour, and our Tariff Task Force will do its best to provide timely and relevant updates as things progress. Please don’t hesitate to reach out to us with questions.
State attorneys general increasingly impact businesses in all industries. Our nationally recognized state AG team has been trusted by clients for more than 20 years to navigate their most complicated state AG investigations and enforcement actions.
State Attorneys General Monitor analyzes regulatory actions by state AGs and other state administrative agencies throughout the nation. Contributors to this newsletter and related blog include attorneys experienced in regulatory enforcement, litigation, and compliance. Also visit our State Attorneys General Monitor microsite.
Contact our State AG Team at StateAG@troutman.com.
Troutman Pepper Locke Spotlight
Solicitors General Insights: A Deep Dive With Mississippi and Tennessee Solicitors General
By Stephen C. Piepgrass and Jeff Johnson
In this episode of our special Regulatory Oversight: Solicitors General Insights series, Jeff Johnson, a former deputy solicitor general in the Missouri Attorney General’s office, welcomes Scott Stewart, solicitor general of Mississippi, and Matt Rice, solicitor general of Tennessee. The episode uncovers the intricacies of being a state solicitor general and the impact of their work on state and national levels.
Multistate AG Updates
$51.75M Settlement in Clearview AI Biometric Privacy Litigation Illustrates Creative Resolution for Startups Facing Parallel Litigation and Enforcement Action
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On Thursday, March 20, a federal judge in the Northern District of Illinois granted final approval to a settlement agreement under which Clearview AI (Clearview) agreed to pay an estimated $51.75 million to a nationwide class if one of several contingencies takes place. This approved settlement agreement resolves In Re: Clearview AI, Inc. Consumer Privacy Litigation, No. 1:21-cv-00135 (N.D. Ill.), a multidistrict suit alleging that the company’s automatic collection, storage, and use of biometric data violated various privacy laws, including Illinois’ Biometric Information Privacy Act (BIPA). The unorthodox settlement not only preserves Clearview’s business model, but may also insulate Clearview from subsequent or parallel regulatory investigations without requiring the company to jeopardize the liquidity necessary for continued growth. Ultimately, this settlement seems to represent a good outcome for the company, especially in light of the fact that that it was achieved over the objections from 23 state attorneys general (AG). U.S. District Judge Sharon Johnson Coleman stated that the settlement is fair, reasonable, and adequate.
Single State AG Updates
Rhode Island AG Targets Real Estate Management and Development Firm for Alleged Unfair and Deceptive Acts and Practices
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In mid-April, Rhode Island Attorney General (AG) Peter F. Neronha announced a settlement with A.R. Building Company, Inc. (ARBC), a national real estate management and development business with properties throughout Rhode Island. The settlement resolved allegations of unfair trade practices with respect to prospective tenants.
Indiana AG Pushes Back on THC Legislation
By Jean Smith-Gonnell, Chris Carlson, and Nick Ramos
On April 21, Indiana Attorney General (AG) Todd Rokita issued a letter to state legislators addressing the pressing issue of legal loopholes surrounding intoxicating hemp-derived products containing delta-8 THC, delta-10 THC, or HHC. These products have garnered significant attention due to their psychoactive effects similar to Delta-9 THC, the primary compound in marijuana. In 2023, Rokita issued an official opinion concluding that these types of products are currently illegal in Indiana. Rokita’s letter discusses the proposed Senate Bill 478, which, among other things, seeks to regulate craft hemp, craft hemp flower products, and THC. Rokita concluded that the proposed bill would make these products legal, does not meaningfully regulate them, and encourages the legislature to reconsider the legislation.
AG of the Week
Kwame Raoul, Illinois
Kwame Raoul was sworn in as Illinois’ 42nd attorney general (AG) in 2019 and took the oath for a second term on January 9, 2023.
Raoul began his legal career as a Cook County prosecutor and later became a partner at two national corporate law firms. He also served as an Illinois state senator for 14 years, which he describes as his “dream job.”
Raoul has championed legislation to counter the long-term effects of violent crime and to support survivors. He established the first-of-its-kind task force to dismantle Organized Retail Crime networks and leads the Illinois Internet Crimes Against Children Taskforce to protect children from online predators.
Raoul collaborates with federal law enforcement to prevent mass shootings in schools and places of worship, combat violent crime, and investigate fraud and public corruption. He spearheaded a partnership with state and local law enforcement enhance professionalism, accountability, and transparency among law enforcement officers statewide.
Raoul also protects Illinois consumers. The office handles tens of thousands of consumer fraud complaints annually, saving residents millions through litigation and mediation each year. He holds industries that jeopardize public health with opioids, e-cigarettes, and environmental pollution accountable. Raoul continues to fight against scams related to home repairs, auto sales, mortgages, identity theft, and student lending.
Raoul frequently coordinates with other state AGs to advocate for access to quality health care and reproductive health services, protect natural resources, promoted just immigration policies, reduce gun violence, and uphold civil rights for all individuals.
Illinois AG in the News:
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On April 29, Raoul, as part of a multistate coalition of 25 states and AGs, filed a lawsuit challenging the dismantling of AmeriCorps.
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On April 29, Raoul led a coalition of 14 AGs in sending a letter to Congress, urging members to oppose two Congressional bills that would prohibit the U.S. Environmental Protection Agency (EPA) from relying on scientific assessments from the Integrated Risk Information System (IRIS) program.
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On April 25, Raoul released a consumer alert urging student borrowers to get out of default and be wary of scammers.
Upcoming AG Events
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May: RAGA | ERC Retreat | Oahu, HI
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May: DAGA | Williamsburg Policy Conference | Williamsburg, VA
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June: RAGA | Summer National Meeting | New York, NY
For more on upcoming AG Events, click here.
Our Cannabis Practice provides advice on issues related to applicable federal and state law. Marijuana remains an illegal controlled substance under federal law.
This article was republished in Employee Benefit Plan Review, September 2025, Volume 79, Number 7.
The New Jersey Department of Labor and Industry (the Department) announced on April 28, 2025, that it was filing a notice of a proposed regulation addressing the test for independent contractor (IC) status under New Jersey law. In 2015, the New Jersey Supreme Court ruled that the three-prong test for IC status under the New Jersey Unemployment Compensation Law also governed IC status under the state’s wage laws. As we reported in our blog post at the time, this three-pronged test, commonly referred to as the ABC test, set a low bar for workers to satisfy in an IC misclassification case in New Jersey. The proposed regulation, if issued in its proposed form, would lower that bar even further. It would also likely prompt blowback from freelancers and other ICs as well as from industry trade organizations, as occurred when California enacted its AB5 legislation in 2020. The new regulation would likely prompt companies utilizing ICs in New Jersey to either cease operating their businesses in the Garden State or double down in their efforts to enhance their IC compliance using a process such as IC Diagnostics™. At the same time, industry stakeholders, including ICs and trade organizations, are likely to seek industry-by-industry exemptions (as was done in California) through legislative action or a voter initiative such as California’s Prop 22.
How does the proposed regulation further curb the use of legitimate ICs in New Jersey?
In its press release regarding the proposed new regulation on IC status, the Department announced that the proposed regulation, currently released on a preliminary basis, will be formally published in the New Jersey Register on May 5, 2025, and that there will be a 60-day public comment period beginning that day.
The proposed regulation is accompanied by a lengthy “Summary.” It states that the Department’s regulation “relies heavily” on two New Jersey Supreme Court opinions: one issued in 1991 in a case called Carpet Remnant Warehouse, the other in 2022 in a case called East Bay Drywall. However, as noted below, the proposed regulation appears to deviate considerably from the Carpet Remnant Warehouse case.
The proposed regulation starts by noting that all three prongs of the ABC test must be met to establish IC status, and the burden is on the hiring party, which the regulations refer to as the “putative employer.” This is consistent with current law in New Jersey and ABC tests in other states.
The proposed regulation then addresses the first prong of the ABC test: that the putative employer “does not exercise control or direction over the individual’s work in fact, and that it does not reserve the right to control the individual’s work.” It lists nine factors that will be considered in determining whether the worker is “free from control or direction” under Prong A. The proposed regulation also notes that such factors “are not exhaustive and additional factors may be considered” because the purpose of “[w]hat is required under Prong A of the ABC test is to evaluate the entire relationship between the individual and the putative employer….” This part of the proposed regulation is consistent with prevailing law in New Jersey and elsewhere around the country.
One of the most objectionable provisions dealing with Prong A: requiring compliance with applicable laws.
The proposed regulation pertaining to Prong A departs in a dramatic manner from virtually every other test for IC status under federal law and the laws in every state — and unless clarified in the final version of the regulation, would not merely tilt the balance in favor of employee status and against legitimate ICs but rather lead to the elimination of all ICs in New Jersey.
The services provided by almost all ICs are typically governed by a number of laws. But the regulation seems to regard a commonplace requirement found in almost every IC agreement — a clause requiring the contractor to comply with all applicable laws — as a form of direction and control. As drafted, the proposed regulation states:
Any control or direction over the performance of services, any control or direction that the putative employer has exercised, or has reserved the right to exercise, in order to be in compliance with a law or rule shall be considered [a form of direction and control]; that is, it shall be given equal weight to what would be given any other control or direction that the putative employer has exercised or has reserved the right to exercise.
Even in the absence of any contractual provision requiring a contractor to comply with applicable laws, the proposed regulation, as drafted, appears to treat as an impermissible form of direction and control a decision by a hiring party to terminate the IC agreement of a contractor who violates the law. Under the proposed regulation it appears that a hiring party cannot, without jeopardizing the IC classification, terminate the IC agreement of, for example:
- An independent salesperson who repeatedly steals merchandise from either the hiring party or a customer;
- A contractor providing driving services who repeatedly drives a vehicle in a manner that violates the law; or
- A contractor providing notary services who notarizes documents for persons he or she knows are not the person who signed the legal papers.
It is anticipated that this part of the proposed regulation, as drafted, will prompt an avalanche of public comments, almost all of which are likely to be in opposition to the above quoted language dealing with Prong A.
One of the most objectionable provisions dealing with Prong B: the customer’s residence or business location as a hiring party’s “place of business.”
New Jersey’s ABC test, like most of the other states that have a three-prong test for IC status, has a “B prong” that can be met in one of two alternative ways: by a showing (i) that the services are performed “outside of the usual course of business” of the party that engages the contractor (sometimes called the “hiring party), or (ii) that such services “are performed outside of all of the [hiring party’s] places of business.”
Some states with ABC tests have taken a broad view of the hiring party’s “usual course of business,” and so does the proposed regulation. Nonetheless, it is likely that many of those who will file comments on the proposed regulation will argue in favor of a more balanced approach to this first part of the B prong.
But the proposed regulation takes an extraordinarily expansive view of the second part of the B prong. It states that a hiring party’s “places of business” not only include “locations where the enterprise has a physical plant or conducts an integral part of its business,” but also include “locations outside of the putative employer’s physical plant, where the services performed by the individual [worker] are an essential component of, rather than ancillary to, the putative employer’s business.”
It is unclear what those words “essential” or “ancillary” mean in the context of the proposed regulation, which continues in an effort to try to explain the use of those words: “This includes the residence or place of business of the putative employer’s client or customer.” The regulation then gives an illustration: if a contracted worker is engaged by a carpet sales business to install carpet at the residences of the carpet company’s customers, each of the customer locations are also the hiring party’s place of business if carpet installation is an “essential component” (as opposed to an “ancillary” part) of the sale.
This view of the second part of the “B prong” almost entirely eviscerates any chance for most ICs and companies using their services from establishing the workers’ IC status. In addition, this part of the proposed regulation appears to be directly contrary to one of the two main New Jersey Supreme Court cases cited in the Summary of the proposed regulation: Carpet Remnant Warehouse.
In that case, the New Jersey Supreme Court held that the hiring party had shown that independent carpet installers met the “B Prong” of the ABC test under the Unemployment Compensation Law when they installed carpet at customers’ homes for a carpet company that offered carpeting at both an installed and uninstalled price. In that case, the Court concluded that the residences of the carpet company are “clearly ‘outside all of the places of business of [the carpet company],’ cautioning that if the B prong were extended to “every geographical point of installation,” as the Department argued, it would be “practically impossible” for a party to satisfy the second alternative of the B prong.
This part of the proposed regulation is likely to provoke as many if not more comments in opposition to the proposed regulation. Unlike the Summary where the Department says it is relying heavily on the New Jersey Supreme Court opinions in Carpet Remnant Warehouse, the proposed regulation appears to change established law by the courts. If this part of the proposed regulation is not abandoned when a final regulation is issued by the Department, it may not survive a court challenge.
There are a number of other locations that bear little or no resemblance to a hiring party’s places of business that the proposed regulation regards as locations “where the putative employer conducts an integral part of its business, even “[p]ublic buildings such as the County Clerk’s office, where a Title Abstractor performs abstracting services, or a public library where a Title Abstractor performs research.” Industries affected by this part of the proposed regulation are likely to file comments questioning how and why the Department construes these types of locations are the putative employer’s “places of business” even if the hiring party leaves it up to the contractor to determine where and how they will render services.
Prong C is tilted toward curtailing IC status but does not seem likely to receive many comments.
The final prong is whether the hiring party can show that the contractor is “customarily engaged in an independently established trade, occupation, profession, or business.” The proposed regulation lists seven factors as relevant to this factor, noting they are not exhaustive and additional factors may be considered. New Jersey court decisions have imposed a higher burden on hiring parties than the courts in many other states when addressing this factor. But nothing stands out as either changing the law or expanding the current requirements under this prong.
The likely ramifications from this new proposed regulation, especially if issued with few if any changes
Unlike California’s AB5 and successor bills enacted in that state with 65 or more exemptions from its strict ABC test, the proposed regulation has none. The regulations carry out the 2015 New Jersey Supreme Court decision applying the ABC test under the New Jersey Unemployment Compensation Law to the New Jersey wage, sick leave, and temporary disability benefits laws, but the Unemployment Compensation Law continues to include over two dozen exemptions from the ABC test. Nowhere in the proposed regulations do they mention that any of these exemptions apply to the wage, sick leave, or disability benefits laws; indeed, the proposed regulation does not even mention that the exemptions in the Unemployment Compensation Law continue.
As a result of the uncertainty as to whether any of the Unemployment Compensation Law exemptions apply to the state wage laws, one industry that was covered by an exemption to the ABC test under the unemployment law in New Jersey, working with the legislature and governor, has been excluded from the ABC test. Real estate salespersons classified as ICs are currently exempted from the ABC test in New Jersey for wage and hour laws under a 2022 amendment to the New Jersey Brokers Act. As the article by Chris Marr in Bloomberg Law’s Daily Labor Report stated, quoting the publisher of this blog, “Like California, the legislators in New Jersey will be inundated by lobbyists” seeking exemptions, if the labor department implements the regulation as it’s currently written, Reibstein said.” Some industries may also proceed with voter initiatives such as what transpired in California when voters approved Prop 22 in November 2020.
Many businesses currently operating in New Jersey with ICs have sought to enhance their level of compliance with IC laws by using a process such as IC Diagnostics™, which seeks to maximize compliance in a sustained and customized manner consistent with a company’s current business model. Due to the issuance of the proposed regulation in New Jersey governing IC status, more businesses are likely to take steps to elevate their compliance including re-documenting and restructuring or tweaking their business models to minimize IC misclassification liability in the Garden State. This is particularly important because New Jersey increased the penalties for IC misclassification to permit treble damages for wage violations including those resulting from misclassification of employees as ICs.
In the meantime, public comments to the proposed regulation governing IC status in New Jersey may be filed through July 4, according to the Executive Director of Legal and Regulatory Services for the Department.
We are happy to provide the 2025 update to the Troutman Pepper Locke LLP Excess and Surplus Lines Law Manual. This edition reflects all of the pertinent changes in the surplus lines laws and regulations of the 50 states and U.S. territories during the past year. You can click below to download a pdf of the entire manual.
We have rolled out a bespoke subscription-based product providing weekly updates to our surplus lines insurance carrier (both U.S. and alien) and our surplus lines insurance broker clients. We scour statutes, regulations, secondary sources, departmental bulletins, and general industry guidance every week to report on new developments, including whether certain new laws apply to the surplus lines market, and the broker, insurer, or both. Critically, we also identify data calls from the states that require the attention of surplus lines insurers, and we help facilitate such filings on behalf of our subscribing clients. Please see Appendix F for sample surplus lines weekly update from our team. To subscribe or get pricing information, please contact us at surpluslines@troutman.com.
We trust you will find this manual to be a valuable desk reference and would be pleased to respond to any of your questions regarding its contents.
On April 17, the Office of the United States Trade Representative (USTR) announced proposed trade actions under Section 301 of the Trade Act of 1974 (Trade Act) to counteract China’s systemic dominance in the maritime, logistics, and shipbuilding sectors. The announcement follows a year-long investigation prompted by a petition from five major U.S. labor unions and culminates in a series of targeted, phased policy actions designed to reduce U.S. dependency on Chinese-controlled infrastructure, revive domestic shipbuilding capacity, and enhance national economic security.
The proposed actions include phased service fees on vessel operators and new tariffs on cargo handling equipment such as ship-to-shore (STS) cranes, with a public comment and hearing process now underway. If adopted as proposed, the new paradigm would support implementation of President Trump’s Executive Order 14269, which outlines a broader strategy to revitalize U.S. maritime industries through:
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Maritime Action Plan: Enhancing domestic shipbuilding and workforce development.
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International Coordination: Engaging allies to align trade policies and reduce dependence on Chinese infrastructure.
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Incentives for Allied Investment: Encouraging allied shipbuilders to invest in U.S. facilities.
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Maritime Security Trust Fund: Proposing to use fee revenues to fund domestic maritime programs.
Background: US Labor Unions Sound the Alarm
The Section 301 investigation began in response to a March 2024 petition from five influential U.S. labor organizations — the United Steelworkers (USW), International Association of Machinists and Aerospace Workers (IAM), International Brotherhood of Boilermakers (IBB), International Brotherhood of Electrical Workers (IBEW), and the Maritime Trades Department of the AFL-CIO (MTD). The petition alleged that China’s top-down industrial policies — including subsidies, market share targets, and other nonmarket interventions — were designed to dominate key maritime sectors and undermine global competition.
USTR initiated an investigation on April 17, 2024, following consultations with advisory committees and the Section 301 Committee. The investigation culminated in the January 16, 2025 “Report on China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance,” which found that China’s practices are unreasonable and burden U.S. commerce.
Key findings include:
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China’s Market Dominance: China controls over 50% of global shipbuilding tonnage (up from less than 5% in 1999), 19% of the commercial world fleet, 70% of ship-to-shore (STS) cranes, 86% of intermodal chassis, and 95% of shipping containers.
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Non-Market Practices: China employs top-down industrial planning, including five-year plans with quantitative targets, subsidies, and policies that displace foreign competitors, reduce competition, and create U.S. supply chain vulnerabilities.
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Economic and Security Risks: Dependence on Chinese maritime infrastructure undermines U.S. economic security, restricts competition, and limits commercial opportunities for U.S. firms and workers.
The USTR determined that China’s actions merit response under Sections 301(b) and 304(a) of the Trade Act (19 U.S.C. 2411(b), 2414(a)), as they displace foreign firms, lessen competition, and create economic dependencies.
Fee Structure on Maritime Transport Services
The USTR notice establishes three categories of phased service fees, to be implemented incrementally over a three-year period:
1. Chinese Operators and Owners
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Who is Covered: Vessels operated or owned by Chinese entities, defined broadly to include entities headquartered, controlled, or substantially influenced by China (including Hong Kong and Macau).
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Fee Basis: Net tonnage (NT).
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Fee Timeline:
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April 17 – October 14, 2025: $0
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October 14, 2025: $50/NT
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Annually increasing to $140/NT by April 2028
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Fee Cap: Maximum of five entries per year per vessel.
2. Chinese-Built Vessels
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Who is Covered: Any vessel built in China, regardless of current ownership, unless exempt.
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Fee Basis: Higher of either NT or container count.
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Fee Timeline (NT):
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October 2025: $18/NT
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April 2026: $23/NT
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April 2027: $28/NT
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April 2028: $33/NT
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Fee Timeline (Container): October 2025: $120/container, rising to $250 by April 2028.
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Exemptions: Vessels arriving empty or in ballast, small-capacity ships, short-sea shipping, U.S.-owned vessels, specialized export vessels, and those in U.S. maritime programs.
3. Foreign-Built Vehicle Carriers
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Who is Covered: All non-U.S.-built vehicle carriers.
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Fee Basis: Car equivalent unit (CEU) capacity.
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Fee Timeline: October 2025: $150/CEU.
In all cases, vessel owners can receive a three-year fee remission if they order and take delivery of a U.S.-built vessel of equivalent size within that period.
LNG Export Restrictions
Beginning in 2028, U.S. liquefied natural gas (LNG) exports must be increasingly transported on U.S.-built, U.S.-flagged, and U.S.-operated vessels. The requirement starts at 1% of exports in 2028 and gradually increases to 15% by 2047. Operators that invest in U.S.-built LNG carriers are eligible for three-year exemptions. The provision acknowledges the lack of current domestic capacity while committing to long-term industrial development.
Proposed Tariffs on STS Cranes and Cargo Equipment
In line with Executive Order 14269, “Restoring America’s Maritime Dominance,” USTR also proposes: up to 100% tariffs on (1) STS cranes made with Chinese components or by People’s Republic of China-influenced companies and (2) Chinese intermodal chassis and shipping containers.
In particular, the USTR proposes to assess additional duties on the following:
|
Item |
HTSUS |
Proposed Rate |
|
Containers |
8609.00.00 |
20% to 100% |
|
Chassis |
8716.39.0090 |
20% to 100% |
|
Chassis parts |
8716.90.30 |
20% to 100% |
|
Chassis parts |
8716.90.50 |
20% to 100% |
|
Ship- to-shore gantry cranes, configured as a high- or low-profile steel superstructure and designed to unload intermodal containers from vessels with coupling devices for containers, including spreaders or twist-locks |
Provided for in subheading HTSUS 8426.19.00 |
100% |
USTR proposes to assess these additional duties in addition to duties assessed under other authorities, including the general duties rate and anti-dumping or countervailing duties. These proposed tariffs directly target Chinese dominance in the cargo equipment market and are intended to secure critical logistics infrastructure from foreign control.
Request for Comments and Timeline
Public comments on the proposal are due by May 8, with a public hearing scheduled for May 19. Comments must be submitted via USTR’s online portal: https://comments.ustr.gov/s/
Industries Likely to Face Issues and Mitigation Strategies
The USTR’s actions will impact several industries, with potential challenges and proposed mitigation strategies outlined below based on public comments and economic considerations.
1. Shipping and Logistics Industry
Issues:
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- Cost Increases: Fees on Chinese operators, Chinese-built vessels, and foreign-built vehicle carriers may raise shipping costs, potentially passed to importers/exporters, affecting supply chains.
- Port Diversion: Operators may consolidate port calls to major hubs to minimize fees, reducing activity at smaller U.S. ports and impacting local jobs.
- Capacity Constraints: Limited U.S. shipyard capacity (currently no U.S.-built LNG vessels) and vessel construction funding limitations may delay operators’ ability to comply with fees or LNG restrictions.
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Mitigation Strategies:
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- Phased Implementation: The 180-day grace period and gradual fee increases allow operators to adjust operations or attempt to source alternative vessels.
- Fee Suspensions: If fully and efficiently implemented, federal funding incentives for ordering U.S.-built vessels could help offset the economic challenges attendant to constructing U.S. Flag LNG carriers and encourage long-term investment in domestic fleets.
- Exemptions: Exclusions for short-sea shipping, smaller vessels, and U.S.-Flagged vessels reduce impacts on regional trade and smaller operators.
- Public-Private Partnerships: Encourage investment in U.S. shipyards for the construction of commercial vessels through grants, tax credits, or the proposed maritime security trust fund to expand capacity.
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2. Export Industries (Agriculture, Coal, Bulk Commodities)
Issues:
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- Competitiveness: Higher shipping costs due to the proposed fees may make U.S. exports (e.g., agriculture, coal) more expensive and therefore less competitive globally, especially for bulk carriers reliant on Chinese-built vessels.
- LNG Exports: Restrictions starting in 2028 may limit export capacity if U.S.-built LNG vessels are unavailable, potentially reducing U.S. market share.
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Mitigation Strategies:
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- Targeted Exemptions: Exclusions for vessels carrying bulk cargo below certain thresholds (e.g., 80,000 DWT) and specialized export vessels could mitigate impacts on commodity exports.
- Long-Term LNG Transition: The 22-year phase-in for LNG restrictions (1% in 2028 to 15% in 2047) would provide the necessary runway to bolster U.S. LNG vessel capacity.
- Infrastructure Investment: Use fee revenues to fund port and shipyard upgrades, reducing long-term costs for exporters.
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3. Port Operations and Smaller Ports
Issues:
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- Reduced Traffic: Fees assessed per port call could lead operators to bypass smaller ports, reducing economic activity and jobs in these communities, but potentially leading to port congestion problems at larger ports.
- Infrastructure Costs: Proposed tariffs on Chinese STS cranes and equipment would increase costs for port upgrades to replace the targeted equipment, as alternative suppliers are limited.
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Mitigation Strategies:
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- Per-Voyage Fees: Fees are assessed per rotation (not per port call), reducing incentives to skip smaller ports.
- Tariff Phase-In: A potential six–24-month phase-in for tariffs (subject to public comment) allows ports to source non-Chinese equipment more gradually.
- Federal Support: Increase funding to the maritime security trust fund, and allocate a portion of the augmented revenues to smaller ports for infrastructure upgrades and job retraining programs.
- Allied Sourcing: Encourage sourcing of cranes and equipment from allied nations (e.g., Japan, South Korea) to diversify supply chains.
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4. US Shipbuilding and Maritime Workforce
Issues:
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- Capacity Shortfalls: U.S. shipyards lack the capacity to meet demand for commercial vessels, especially LNG carriers, limiting the effectiveness of fee suspensions.
- Skilled Labor Shortages: A lack of trained mariners and shipyard workers may hinder scaling production to meet new demand.
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Mitigation Strategies:
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- Workforce Development: Fund training programs through the maritime security trust fund to address labor shortages.
- Shipyard Modernization: Provide grants or low-interest loans to expand and modernize U.S. shipyards, focusing on commercial vessel production.
- Incentives for Investment: Implement tax credits or subsidies for U.S. and allied shipbuilders to build new facilities or retrofit existing ones.
- Long-Term Planning: The phased LNG restrictions and fee suspensions provide a clear demand signal to stimulate and facilitate investment over decades.
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5. Consumers and Importers
Issues:
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- Price Increases: Higher shipping costs may lead to increased prices for imported goods, impacting consumers and retailers, which increased costs may be amplified by the ongoing tariff dynamics between the U.S. and China
- Supply Chain Risks: Tariffs on Chinese equipment could cause delays in port operations if alternative suppliers cannot meet demand.
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Mitigation Strategies:
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- Gradual Implementation: Phased fees and potential tariff phase-ins minimize immediate price shocks.
- Diversified Sourcing: Create incentives for importers to source from non-Chinese suppliers, supported by trade agreements with allies.
- Consumer Protections: Monitor price increases and provide temporary relief (e.g., tax rebates) for essential goods if costs rise significantly.
- Supply Chain Resilience: Bolster investment in domestic manufacturing of cargo handling equipment to reduce long-term reliance on imports.
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Implications for Industry
The proposed actions mark one of the most ambitious uses of Section 301 authority since the 2018 tariffs on Chinese goods. Industry stakeholders are expected to scrutinize supply chain disruptions and cost implications, feasibility of sourcing U.S.-built vessels amid domestic shipyard capacity and vessel construction financing constraints, enforcement mechanisms and potential exemptions, and the risk of retaliation by China.
This alert is intended as a guide only and is not a substitute for specific legal or tax advice. Please don’t hesitate to reach out to the authors with questions.
As we previously discussed, the Financial Crimes Enforcement Network (FinCEN) published an interim final rule (IFR) on March 26 that narrowed the beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA). While the changes imposed by the IFR provide relief to U.S. entities and their beneficial owners, and to beneficial owners of foreign companies who are U.S. citizens, there are a few potentially unintended consequences that resulted from the IFR.
The IFR is not a final rule and is subject to a 60-day comment period. That comment period ends on May 27, which is after the new reporting deadline of April 25 for entities that became reporting companies before March 26. FinCEN said it intends to publish a final rule later this year.
Here are some practical implications of the IFR to keep in mind as you assess its impact.
Foreign Individuals and Companies Operating Through US Entities Are Generally Exempt
The IFR exempts domestic entities from the CTA’s BOI reporting requirements, regardless of whether such entities are ultimately owned by foreign or domestic individuals or whether there are intermediate foreign entities in the chain of ownership.
This means that foreign individuals that elect to form and use a domestic entity will not be subject to the CTA with respect to that entity. Further, foreign companies may elect to operate in the U.S. through domestic subsidiaries that do not meet any exemption from CTA reporting (other than the new, broad exemption available to domestic entities), and so long as the foreign parent itself does not register to do business in the U.S., it will (along with its domestic subsidiaries and its beneficial owners) avoid CTA reporting requirements.
These outcomes may create unintended incentives that could make illicit activity more difficult to detect than it would have been under the CTA’s prior formulation.
Company Applicants Who Are US Persons May Still Be Required to Submit BOI
The IFR amends 31 CFR §1010.380(d) to add a new subsection (4) to provide that reporting companies do not have to report the BOI of any U.S. persons who are beneficial owners and the corollary that U.S. persons do not have to provide BOI with respect to any reporting company for which they are a beneficial owner. Below is the amended text:
(4) Exemptions. (i) Reporting companies are exempt from the requirement in 31 U.S.C. 5336 and this section to report the beneficial ownership information of any U.S. persons who are beneficial owners.
(ii) U.S. persons are exempt from the requirements in 31 U.S.C. 5336 and this section to provide beneficial ownership information with respect to any reporting company for which they are a beneficial owner.
Notably, the IFR does not explicitly modify the requirement that reporting companies that registered in the U.S. on or after January 1, 2024, must report the BOI of their company applicants. The lack of any substantive discussion about company applicants in the IFR suggests that reporting companies must report the BOI of company applicants even when a company applicant is a U.S. person.
However, other public statements from FinCEN cast doubt on the treatment of company applicants who are U.S. persons:
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Take, for example, the first sentence in FinCEN’s press release announcing the changes under the IFR: “Consistent with the U.S. Department of the Treasury’s March 2, 2025 announcement, the Financial Crimes Enforcement Network (FinCEN) is issuing an interim final rule that removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act.”
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The term “beneficial ownership information” is defined in 31 CFR §1010.380(g)(2) as “any information provided to FinCEN under this section,” which would include information about the company, its company applicants, and its beneficial owners. Therefore, FinCEN’s statement above is incorrect with respect to removing the requirement for U.S. persons to report BOI if, in fact, U.S. persons are required to report BOI in their capacities as company applicants.
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Further, in an alert published on its website, FinCEN said it will not “enforce any beneficial ownership reporting penalties or fines against U.S. citizens.” This would suggest that U.S. persons may be able to withhold their BOI as company applicants from reporting companies (without threat of enforcement by FinCEN), though reporting companies appear to remain required to report such information under the IFR.
If FinCEN intends to require company applicants who are U.S. persons to provide their BOI, it may have created an unintended interpretive question with respect to company applicants who are also beneficial owners — that is, if a U.S. person is a beneficial owner of a foreign company and a company applicant of such company, are they exempt from reporting their BOI in the capacity of an applicant?
The amended text of 31 CFR §1010.380(d) above broadly states that U.S. persons are exempt from providing BOI with respect to any company for which they are a beneficial owner. A plain reading of this language in isolation may be interpreted to mean that where a U.S. person is a beneficial owner of a company and a company applicant of that company, such person would not need to provide BOI to that company at all, whether as company applicant or beneficial owner.
However, on the whole, the CTA as modified by the IFR does not clearly articulate an exemption from the reporting requirements for U.S. persons who are company applicants, and a conservative reading would suggest that U.S. persons who are company applicants must still report their BOI.
This will be a topic to watch moving forward as FinCEN prepares a final rule, which may provide additional clarity about the reporting obligations of company applicants who are U.S. persons.
The BOI Report Has Been Changed
In connection with the publication of the IFR, the BOI Report available on FinCEN’s website has been modified to add a new field in Part II, Item 34. That item now includes a checkbox for if “All beneficial owners of the reporting company are U.S. persons.” Previously, beneficial owner information was required in order to complete a report, but this checkbox enables a report to be filed without beneficial owner information in the event that all beneficial owners are U.S. persons.
Domestic Entities Do Not Need to Update or Correct Reports
Domestic entities are now exempt from the CTA reporting requirements, which includes being exempt from updating or correcting previously submitted reports. Therefore, if a domestic company previously filed an initial CTA report and noticed an error in the report or had filed with incomplete information, it does not need to modify the report, and that entity has no further BOI reporting obligations under the CTA.
No Update Was Provided About Deactivating FinCEN Identifiers
In preparation for CTA reporting, many individuals have applied for and obtained FinCEN identifiers, which would assist with efficient reporting. Presumably, many U.S. persons obtained FinCEN identifiers in connection with anticipated BOI reports for domestic entities that will no longer be necessary.
Obtaining a FinCEN identifier requires submitting BOI directly to FinCEN and further requires that the individual maintain the identifier by updating or correcting information associated with the FinCEN identifier within 30 calendar days of any change to the reported information.
FinCEN has previously commented (in FAQ M.6.) that it is “actively assessing options to allow individuals to deactivate a FinCEN identifier so that they do not need to update the underlying personal information on an ongoing basis.”
To date, FinCEN has not provided a means to deactivate a FinCEN identifier and it did not address this topic in the IFR.
A Few Final Reminders
While the IFR has dramatically changed the CTA and yielded some potentially surprising results, there are a few important reminders for reporting companies, as defined in the IFR, that will be subject to CTA reporting moving forward:
First, the filing deadline is (i) April 25 for any entity that became a reporting company before March 26, 2025, or (ii) 30 calendar days after notice of registration to do business in the U.S. for any entity that became a reporting company on or after March 26, 2025.
Second, remember that CTA reporting requirements will apply to reporting companies until they (i) meet one of the 24 exemptions from CTA reporting or (ii) irrevocably withdraw all registrations to do business in the U.S. (see FAQ C.16. for more information about irrevocable withdrawal).
Lastly, all companies that were reporting companies on or after January 1, 2024, and do not meet an exemption at the time of their filing deadline, must make a CTA filing, even if they have irrevocably withdrawn their registration to do business in the U.S. since January 1, 2024.
We advise that clients should continue to monitor the developments related to the IFR in the lead-up to a potential final rule published by FinCEN later this year. Existing reporting companies should continue to prepare for filing by the April 25 deadline, and companies should be mindful of the CTA’s reporting obligations for foreign entities that register to do business in the U.S. (and do not meet an exemption) moving forward.
With the Trump administration’s new tariffs, some companies may be looking for ways to compensate for increased costs of imports. Companies operating in the international supply chain must be aware that any attempts to circumvent heightened duties may draw unwanted attention from the Department of Justice (DOJ) and/or whistleblowers through False Claims Act (FCA) enforcement. A recent complaint the DOJ filed in the Eastern District of California demonstrates how the DOJ and/or whistleblowers can use the FCA to pursue customs fraud.
On April 11, the DOJ filed a complaint in intervention against Barco Uniforms, Inc. (Barco), David Chan, Kenny Chan, and multiple companies controlled by David and Kenny Chan (the Chan companies, together with David and Kenny Chan, the Chan defendants). The complaint alleges that the defendants violated the FCA by knowingly and improperly underpaying customs duties on imported apparel. The case, initially a qui tam whistleblower action, is United States, ex rel. Lee v. Barco Uniforms Inc., No. 2:1-cv-1805, pending in the U.S. District Court for the Eastern District of California.
Defendant Barco sells commercial uniforms to restaurants and health care providers, among other customers. For decades, the Chan companies operated as the manufacturers and direct suppliers of the uniforms Barco sold to its customers in the U.S. Most of the uniforms the Chan companies sold to Barco were manufactured in China.
The DOJ alleges that Barco and the Chan defendants caused material, false representations to be presented to the U.S. through the information submitted to U.S. Customs and Border Protection (CBP) on the required Entry Summary/Form 7501. The Entry Summary/Form 7501 requires a party making an entry of goods into the U.S. to disclose, among other information, a description of the goods, the quantity of the goods, the value of each item, as well as the duty rates and duties owed for the goods. The DOJ views each piece of information provided with the Entry Summary/Form 7501 as a material representation to the U.S.
According to the DOJ’s complaint, Barco and the Chan defendants schemed to underpay customs duties owed to the U.S. on the uniforms the Chan companies sold to Barco. By scheming to underpay customs duties, the Chan companies were able to offer Barco lower prices for the uniforms Barco purchased, which allowed Barco to win lucrative contracts from customers.
The DOJ alleges that Barco documented the scheme on internal “cost sheets” that would reflect falsified duties. Barco often would provide these cost sheets to the Chan companies to identify target costs for the uniforms, including artificially low target duties.
The DOJ also alleges that the Chan companies created two invoices for the uniforms Barco purchased. One invoice would reflect the actual price that Barco agreed to pay the Chan companies. A second invoice would have a falsified, lower price for the same items to justify the artificially low duties. The second invoice, with the lower price, was provided to a customs broker who relied upon that falsified price when submitting the Entry Summary/Form 7501 to CBP.
Based on these alleged efforts to avoid paying full custom duties on the goods Barco purchased from the Chan companies, the DOJ has asserted three counts of reverse false claims FCA violations against Barco and the Chan defendants.
Key Takeaways
In light of the Trump administration’s imposition of sweeping tariffs, companies that import goods, particularly from China and other countries facing increased tariffs, should prepare for an increase in investigative scrutiny under the FCA based on any actual or perceived attempts to evade the heightened duties and their associated costs.
Companies need to ensure that they have effective compliance programs and that their own import policies and procedures are consistent with all applicable laws. Given the increased risk with tariffs imposed on imports from targeted countries, now is the time that companies may want to consider internal audits of their compliance controls. Similarly, companies may want to review and revise their policies that enable them to maintain visibility into all stages of their supply chain. Moreover, because qui tam whistleblowers often initiate FCA actions, companies should ensure that they have confidential reporting mechanisms for potential FCA violations to be raised internally, and subsequently investigated and appropriately addressed.
For a debtor in financial distress, having the right team in place to steward the company through a restructuring can mean the difference between success and failure. To incentivize top talent to stay with the debtor and continue to perform through a Chapter 11 case, debtors may implement one or more so-called “key employee retention plans” (KERPs) or “key employee incentive plans” (KEIPs).
This article will discuss the key issues, and differences, of KEIPs and KERPs. To access this article and read other insights from our Creditor’s Rights Toolkit, please click here.
On Wednesday, April 16, Secretary of the Interior Doug Burgum directed the Bureau of Ocean Energy Management (BOEM) to order Equinor to “stop work” on its 812 megawatt Empire Wind 1 project just outside of New York Harbor. This project is a major component of New York’s plan to meet its 2040 carbon zero goal, and received all of its federal approvals in 2023 and 2024 after more than four years of intensive federal, state, and local environmental review. Equinor began active construction almost immediately after receiving full permitting approval in early 2024 and resumed marine activities in Spring 2025.
This order cited as its primary rationale the administration’s January 20 Wind Presidential Memorandum, which withdrew vast swaths of the ocean from further offshore wind leasing and indefinitely paused all offshore and onshore wind permits and approvals pending a “comprehensive assessment” of the environmental and economic impacts of wind energy.
While the administration had made no public statements regarding the status or progress of this assessment before April 16, the order to BOEM stated that “staff of the Department of the Interior has obtained information that raises serious issues with respect to the project approvals” for the project. Without providing specifics, the order went on to state that “[t]he matters identified thus far suggest that approval for the project was rushed through by the prior Administration without sufficient analysis or consultation among the relevant agencies[.]” Curiously, this order came days after the issuance of a long-anticipated Government Accountability Office (GAO) report on BOEM’s offshore wind permitting process that, while critical of certain aspects of BOEM’s stakeholder engagement, did not appear to identify major legal deficiencies or substantive analytical failures.
Because the order does not include these specifics, it is unclear whether it is legally defensible. The Outer Continental Shelf Lands Act (OCSLA) regulations only authorize BOEM’s sister sub-agency, the Bureau of Safety and Environmental Enforcement (BSEE) to halt offshore wind construction — and then only if the developer is in violation of “an applicable law; regulation; order; or provision of a lease, grant, plan, or BSEE or BOEM approval.” 30 CFR 285.401(a). No such violation has been alleged here. Moreover, even if BSEE had proffered evidence of a violation, the developer must be given an opportunity to cure it before being ordered to cease activities. Id.
Rather than relying on a specific regulation authorizing the government to pause construction, the stop-work order to Equinor simply cited the generic standard under which the government must review offshore wind projects. 43 U.S.C. 1337(p)(4); 30 CFR 55.102.
Beyond the legalities of this particular order, the administration’s action undermines the certainty of the federal permitting process — not just in offshore wind but across all industries. Typically, vested rights in a federal permit are paused or revoked in extraordinarily limited circumstances, such as malfeasance by the project proponent or the discovery of material new information that was not available to the decision-maker at the time the permit was issued. It remains to be seen whether Wednesday’s decision represents a one-off or the start of a new type of relationship between project proponents and permitting agencies.
Troutman Pepper Locke will continue to monitor the legal and policy implications of this order as a fluid situation continues to develop. For questions or to discuss how these developments may impact your business and projects, please contact the authors.