Aeron Marine Shipping Co. v. U.S., s. 81-2294
| Decision Date | 23 November 1982 |
| Docket Number | 81-2355 and 81-2379,Nos. 81-2294,s. 81-2294 |
| Citation | 224 U.S.App.D.C. 373,695 F.2d 567 |
| Parties | , 224 U.S.App.D.C. 373 AERON MARINE SHIPPING COMPANY, et al., Appellants, v. UNITED STATES of America, et al. AERON MARINE SHIPPING COMPANY, et al. v. UNITED STATES of America, et al. American Maritime Association, Appellant. AERON MARINE SHIPPING COMPANY, et al. v. UNITED STATES of America, et al., Appellants. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Appeals from the United States District Court for the District of Columbia (Civil Action No. 79-2048).
Mark P. Schlefer, Washington, D.C., with whom Michael Joseph and Thomas L. Mills, Washington, D.C., were on the brief, for Aeron Marine Shipping Co., et al., appellants in No. 81-2294 and cross-appellees in Nos. 81-2355 and 81-2379.
Michael J. Ryan, Asst. U.S. Atty., Washington, D.C., with whom Stanley S. Harris, U.S. Atty., and Royce C. Lamberth and John Oliver Birch, Asst. U.S. Attys., Washington, D.C., were on the brief, for United States of America, et al., appellees in Nos. 81-2294 and 81-2355, and cross-appellants in No. 81-2379.
Kenneth M. Raisler, Asst. U.S. Atty., and Michael Kimmel, Atty., Dept. of Justice, Washington, D.C., also entered appearances for United States of America, et al.
Joseph A. Klausner, Washington, D.C., with whom Allan A. Tuttle, Washington D.C., was on the brief, for American Maritime Ass'n, appellees in Nos. 81-2294 and 81-2379, and cross-appellant in No. 81-2355.
Before ROBINSON, Chief Judge, and WALD and EDWARDS, Circuit Judges.
Opinion for the Court filed by Circuit Judge WALD.
Appellant Aeron Marine Shipping Company ("Aeron") petitioned appellee Maritime Subsidy Board for permission to carry foreign preference cargos on seven subsidized bulk cargo ships. The Subsidy Board granted the petition for only two of the seven ships, subject to the condition that the two ships carry preference cargos at world rates plus a one-way fuel differential allowance. Aeron sought review in the district court, arguing that (1) all seven ships should be admitted to the foreign preference trades; (2) the Subsidy Board had no authority to set rates; and (3) even if the Board could set rates, the chosen rate was unreasonable. The district court, in an opinion published at 525 F.Supp. 527 (D.D.C.1981), ordered the Board to admit all seven ships. However, it ruled that the Board had rate-setting authority and had set a reasonable rate.
Aeron appeals the district court's decision on the two rate issues and defendant-intervenor American Maritime Association cross-appeals the order to admit all seven ships. We affirm the district court's decision to order admission of all seven ships and its ruling that the Subsidy Board has authority to set rates. However, we cannot sustain the reasonableness of the Board's rate decision because the Board made key assumptions without supporting evidence. We therefore reverse the district court on this single issue and instruct the court to remand to the Subsidy Board to reconsider the proper rate.
This case involves the construction of several related statutes, enacted over several decades. The Merchant Marine Act of 1936 ("Act") 1 established an elaborate system for subsidizing both the domestic merchant marine and domestic shipbuilders. Congress believed that it was "necessary for the national defense" to have a merchant marine capable of carrying all "domestic" cargo (cargo shipped between two U.S. ports) and "a substantial portion" of all "foreign" (export and import) cargo. Merchant Marine Act Sec. 101, 46 U.S.C. Sec. 1101. It recognized, however, that high U.S. labor costs made U.S.-built and U.S.-manned ships uncompetitive with foreign ships. To provide U.S. ships with a protected market, Congress at various times reserved certain cargos, called "preference" cargos, for U.S. ships. In particular, the Cargo Preference Act of 1954 2 amended the Merchant Marine Act to require government agencies to use U.S. vessels for at least 50% of all foreign cargos that the United States has bought, sold, or provided financing for, so long as those vessels are "available at fair and reasonable rates for United States-flag commercial vessels." Merchant Marine Act Sec. 901(b)(1), 46 U.S.C. Sec. 1241(b)(1). The effect of the Cargo Preference Act is to indirectly subsidize U.S. ships by paying them premium rates, which in practice can be "more than twice that of the commercial foreign-flag market." H.R.Rep. No. 1073, 91st Cong., 2d Sess. 26 (1970) ("H.R.Rep.").
Unfortunately, these attractive rates available to U.S. ships under the premium rate system failed to induce new construction of U.S. "bulk" ships. 3 Therefore, Congress, in 1970, adopted a direct subsidy program. Under this program, new bulk ships could qualify for both "construction differential subsidy" (CDS) and "operating differential subsidy" (ODS). 4 Congress designed CDS and ODS to bring the construction and operating costs of U.S. ships, net of subsidy, into parity with those of foreign ships. 5 It expected the direct subsidy program to encourage construction of new bulk ships. It also expected that eventually these new ships would carry foreign preference cargos 6 at world rates; the costly premium rate system would be phased out. 7
At the same time, Congress protected investment in existing bulk ships that carried preference cargos at premium rates--so-called "unsubsidized" ships--in two ways. First, under Merchant Marine Act Sec. 605(c), 46 U.S.C. Sec. 1175(c), subsidized vessels would not be admitted to the preference trades at all unless the Secretary of Transportation 8 determined, after public hearing, that "the service already provided by vessels of United States registry is inadequate, and that in the accomplishment of the purposes and policy of this [Act] additional vessels should be operated thereon." Second, during a phase-in period of 5 years or so, by administrative action, "unsubsidized" ships were to receive priority for preference cargos--"the subsidized operator would come in only after there were no [unsubsidized] takers, or there were no takers at decent rates." 9
Aeron owns seven subsidized 91,000-ton oil tankers, also suitable for carrying grain and other dry bulk cargos. 10 These ships, built with CDS, were delivered between 1974 and 1976; each holds a 20-year ODS contract with the Maritime Subsidy Board. Under the operating subsidy contracts, the Subsidy Board reimburses Aeron for the excess of Aeron's cost for wages, insurance, maintenance, and repair over the cost of the same items to a foreign-flag carrier. Other operating costs are not subsidized because Congress did not expect them to differ significantly for U.S. and foreign vessels. Importantly, fuel costs are not subsidized.
However, subsequent events undermined Congress' expectation that ODS would make U.S. vessels competitive with foreign vessels. Until recently, U.S. ships, including the Aeron vessels, were built with steam engines, while foreign ships were powered by diesel engines. Diesel engines are more fuel-efficient but require more frequent repairs. In 1972, when Aeron contracted for its vessels, steam engines made economic sense because U.S. repair costs were higher than foreign repair costs and the lower repair costs more than offset the extra fuel expense. 11 Since the 1973-1974 escalation in fuel prices, however, steam-powered vessels have become much more expensive to operate than diesel-powered vessels. As a result, ODS falls short of making the Aeron vessels fully competitive with foreign vessels. 12
The ODS contracts initially barred the Aeron vessels from carrying foreign preference cargos. In July 1976, the Board amended the contracts to permit the Aeron ships to carry foreign preference cargos at world rates when those cargos would otherwise have been carried by foreign ships. 13 In August 1977, the Board again amended the ODS contracts to permit the vessels to carry certain liquid bulk preference cargos at premium rates but without receiving ODS. 14 In April 1978, Aeron requested permission from the Board to carry dry bulk cargos in lots of 55,000 tons or more under a similar arrangement (premium rates less any ODS received).
Intervenor American Maritime Association, representing owners of "unsubsidized" premium-rate ships, opposed Aeron's request to carry dry bulk preference cargos and requested a hearing under Sec. 605(c), 46 U.S.C. Sec. 1175(c), claiming that existing service was adequate and that new entry would cause its members substantial competitive harm. After holding the Sec. 605(c) hearing, the Subsidy Board issued an opinion concluding that "U.S.-flag services in the bulk preference trades ..., including the applicants' ... bulk vessels, is and will be inadequate" and that "operation of [the proposed] additional vessels ... in the bulk preference trades would further the accomplishment of the purposes and policy of the Act within the meaning of Section 605(c)." Atlas Marine Co., MSB No. S-605, 18 Ship.Reg.Rep. (P & F) 987, 1012 (1978) ("Section 605(c) Opinion "). It deferred for later consideration issues "related to the provisions of the Act other than Section[ ] 605(c)," including "which elements of cost ought to be included in the calculation of fair and reasonable rates for subsidized operators." Id. at 1011.
The Subsidy Board addressed the remaining issues in a Tentative Opinion and Order Aeron Marine Shipping Co., MSB No. A-132, 19 Ship.Reg.Rep. (P & F) 111 (Mar. 16, 1979) ("Tentative Opinion "), solicited and received comments from all interested parties, and then issued a Final Opinion and Order that, with minor exceptions, adopted the Tentative Opinion and Order. Aeron Marine Shipping Co., MSB No. A-132, 19 Ship.Reg.Rep. (P & F) 491 (June 14, 1979) ("Final...
To continue reading
Request your trial
-
Glavin v. Clinton
...over a general provision ... particularly when the two are interrelated and closely positioned..."); Aeron Marine Shipping Co. v. United States, 695 F.2d 567, 576 (D.C.Cir.1982). Thus, where Section 195 is a specific statutory prohibition of sampling for apportionment of Congress, it prevai......
-
National Organization for Women, Washington, D.C. Chapter v. Social Sec. Admin. of Dept. of Health and Human Services
...Div. of Rhodia, Inc. v. FDA, 161 U.S.App.D.C. 395, 403, 495 F.2d 975, 983 (1974).116 Id.117 Aeron Marine Shipping Co. v. United States, 224 U.S.App.D.C. 373, 379, 695 F.2d 567, 573 (1982).118 Aeron Marine Shipping Co. v. United States, 525 F.Supp. 527, 534 (1981), quoting Moore-McCormack Li......
-
Baystate Medical Center v. Leavitt
...ends.'"30 See City of Brookings Mun. Tel. Co. v. FCC, 822 F.2d 1153, 1168 (D.C.Cir. 1987) (quoting Aeron Marine Shipping Co. v. United States, 695 F.2d 567, 577-80 (D.C.Cir.1982), and Office of Communication of the United Church of Christ v. FCC, 779 F.2d 702, 707 (D.C.Cir.1985)). Here, ign......
-
City of Brookings Mun. Telephone Co. v. F.C.C.
...239, 246, 9 L.Ed.2d 207 (1962)), cert. denied, 469 U.S. 1034, 105 S.Ct. 507, 83 L.Ed.2d 398 (1984); accord Aeron Marine Shipping Co. v. United States, 695 F.2d 567, 577 (D.C.Cir.1982) (quoting Sierra Club v. Costle, 657 F.2d 298, 323 (D.C.Cir.1981)). We must be able to discern this connecti......