American Cargo Transport, Inc. v. Natsios

• Decision Date: 19 April 2006
• Docket Number: Civil Action No. 05-1452 (RBW).
• Citation: American Cargo Transport, Inc. v. Natsios, 429 F.Supp.2d 139 (D. D.C. 2006)
• Parties: AMERICAN CARGO TRANSPORT, INC., Plaintiff, v. Andrew S. NATSIOS, United States Agency for International Development, and John Jamian, Acting Director, Department of Transportation, Defendants.
• Court: U.S. District Court — District of Columbia

429 F.Supp.2d 139

AMERICAN CARGO TRANSPORT, INC., Plaintiff, v.Andrew S. NATSIOS, United States Agency for International Development, and John Jamian, Acting Director, Department of Transportation, Defendants.

Civil Action No. 05-1452 (RBW).

United States District Court, District of Columbia.

April 19, 2006.

COPYRIGHT MATERIAL OMITTED

Timothy B. Shea, Nemirow Hu & Shea, Washington, DC, for Plaintiff.

John C. Truong, U.S. Attorney's Office for the District of Columbia, Civil Division, Washington, DC, for Defendants.

MEMORANDUM OPINION

WALTON, District Judge.

On July 22, 2005, the plaintiff, American Cargo Transport, Inc.("ACT"), filed this action to challenge a decision of the United States Agency for International Development("USAID").Complaint ("Compl.")¶ 23.The USAID's decision, made on or about July 13, 2005, awarded a contract for the oceanic shipment of 2,009 metric tons of sorghum from Dubai, UAE to Mombosa, Kenya, by a non-United States ("U.S.")-flag ship.Compl.¶ 15.ACT, a bidder for this contract and a U.S.-flag ship enterprise, contends that the USAID's contract award to a non-U.S.-fiag ship was an arbitrary and capricious override of the Cargo Preference Act of 1954 ("CPA"), 46 U.S.C. app. § 1241 et seq.(2000), in violation of the Administrative Procedure Act("APA"), 5 U.S.C. § 551 et seq.(2000), and therefore, should be set aside.Compl.¶¶ 23, 25; Pl.'s Mot. for Summary Judgment("Pl.'s Mot.") 4.Currently before the Court are the parties' cross-motions for summary judgment.¹For the reasons that follow, the Court grants the defendants' motion for summary judgment and denies the plaintiffscross-motion for summary judgment.

I.Background

(A) Statutory Background

The CPA regulates, among other things, the shipment of materials or commodities for the benefit of other countries.46 U.S.C. app. § 1241.Under the CPA, Congress established a preference for shipping such cargo on U.S.-flag vessels.Id.Specifically, the CPA states:

Whenever the United States shall . . . furnish to or for the account of any foreign nation without provision for reimbursement, any equipment, materials, or commodities, within or without the United States, . . . the appropriate agency or agencies shall take such steps as may be necessary and practicable to assure that at least 50 per centum of the gross tonnage of such equipment, materials, or commodities, . . . which may be transported on ocean vessels shall be transported on privately owned United States flag commercial vessels, to the extent such vessels are available at fair and reasonable rates for United States-flag commercial vessels, in such manner as will insure a fair and reasonable participation of United States-flag commercial vessels in such cargoes by geographic areas.

Id.§ 1241(b)(1)(emphasis added).Shipments of agricultural commodities are further regulated by § 1241f(a)(1), which provides that, in addition to the preferences set forth in § 1241(b)(1), another "25 percent of the gross tonnage of agricultural commodities or the products thereof . shall be transported on United States-flag commercial vessels."Id.§ 1241f(a)(1).Taken together, these regulations assure that at least seventy-five percent of agricultural commodities procured by the United States are transported on U.S.-flag vessels.Seeid.§§ 1241(b)(1), 1241f(a)(1).The Maritime Administration ("MARAD"), a division of the United States Department of Transportation, is charged with ensuring compliance with the CPA.See46 C.F.R. §§ 381.1-382.4(2006).And under regulations promulgated by the MARAD, "[e]ach department or agency having responsibility under the [CPA]" must satisfy their requirements under the CPA before using foreign-flag carriers.²Id.§ 381.5.These regulations also established a formula to calculate what a "fair and reasonable rate" is for U.S.-flag vessels under the CPA, § 382.3, and clarify that the CPA need not be utilized when "U.S. flag vessels are not available at fair and reasonable rates," or "there is a substantially valid reason for fixing foreign-flag vessels first,"§ 381.5.

Title II of the Agricultural Trade Development and Assistance Act of 1954, 7 U.S.C. § 1691 et seq.(2000)("Title II"), seeks to use "abundant agricultural productivity to promote the foreign policy of the United States by enhancing food security of the developing world."7 U.S.C. § 1691.The USAID is charged with administering the humanitarian aid programs under Title II,7 U.S.C. § 1721, and through these programs the USAID provides both emergency and non-emergency agricultural assistance to foreign countries, 7 U.S.C. § 1722(a)-(b).Agricultural food programs under Title II are subject to the CPA's U.S.-flag ship requirements.See46 U.S.C. app. §§ 1241(b)(1),1241f(a)(1).However, when emergency assistance is being supplied, it may be provided "[n]otwithstanding any other provision of law."7 U.S.C. § 1722(a).Thus, when emergency assistance is being provided under § 1722(a), the USAID need not comply with the shipping requirements of the CPA.Seeid.

(B) Factual Background

The Food For Peace program ("FFP") is a Title II program administered by the USAID.Defs.' Mem., Ex. Aat 2(Declaration of Denise Scherl, Chief, Transp. Div., Office of Acquisition and Assistance, USAID ("Scherl Decl.")).On June 9, 2005, the USAID approved emergency food aid for south central Somalia through this program.Administrative Record ("Admin.R.")at 27-28.This plan called for cooperation with a non-profit organization, the Cooperative for American Relief Everywhere ("CARE"), to distribute a total of 24,240 metric tons of sorghum, lentils, vegetable oil, and corn soy blend to the region.Admin. R.at 27-31.The USAID cooperates with CARE by providing Title II grants authorized under 7 U.S.C. § 1722(d)-(e).Admin. R.at 27-28.

On July 11, 2005, the CARE issued a solicitation for the oceanic transport of approximately 2,009 metric tons of sorghum from Dubai, United Arab Emirates, to Mombasa, Kenya.Id. at 12-13.This sorghum was ultimately destined for distribution in Somalia under the FPP Title II program.Id. at 12.In response to the July 11, 2005, solicitation, ACT and other ocean carriers submitted proposals to transport the sorghum.Id. at 14-24.The ACT's bid was for its U.S.-flag vessel, the Thunder/Lightning, to transport the sorghum at the price of $298 per metric ton, with a departure date from Dubai on July 20, 2005, and an arrival date in Mombasa on July 29 or 30, 2005.Id. at 22.

On July 19, 2005, seven days after the proposals were submitted, the USAID awarded the sorghum contract to the lowest bidder, Global Container Lines ("GCL").Id. at 25.GCL's bid was for its foreign-flag vessel, departing Dubai on July 23, 2005 and arriving in Mombasa on August 7, 2005, to transport the sorghum at the rate of $65 per metric ton.Id. at 20.In awarding the contract to a non-U.S.-flag vessel, the USAID relied on the emergency assistance provision of 7 U.S.C. § 1722(a) to bypass the preference given to U.S.-flag ships by the CPA.Id. at 6-8.According to the government, the USAID selected a foreign-flag ship to deliver the cargo because the difference in cost between the lowest bid for the services of a U.S.-flag ship was $233 per metric ton greater than the offer made by GCL.Thus, paying for the service of a U.S.flag ship would significantly impact the USAID's ability to fulfill the objectives of the FFP program to "alleviate human suffering in the region [during the 2005] fiscal year."Id.;Defs.' Mem.at 4.Moreover, the USAID stated that it "considered the benefit of [the p]laintiff's offer to deliver the sorghum to Somalia seven days earlier against the savings gained from using a foreign-flagged vessel, and decided that the benefit does not outweigh the `overall harm to the future of the program by paying [the plaintiff's] exorbitant rates.'"Id.(quotingScherl Decl.at 4.).

ACT objected to the USAID's decision to award the contract to GCL and sought reconsideration of that decision.Admin. R.at 85-86.In addition, ACT initiated an internal grievance procedure through the MARAD pursuant to 46 C.F.R. § 381.6.Id. at 88-89.After reviewing ACT's grievance, the MARAD determined that the USAID had not complied with the CPA when it awarded the contract to GLC.Id. at 91, 97-98.Notwithstanding ACT's objection and the MARAD's determination, the USAID refused to alter its decision to award the contract to GCL.Id. at 88.

On July 22, 2005, ACT commenced this action challenging the USAID's decision to award the sorghum contract to GCL.The plaintiff contemporaneously filed a motion for a temporary restraining order and a motion for a preliminary injunction.The Court heard arguments on the plaintiff's motions on July 26, 2005.At the conclusion of the hearing, the Court orally denied the plaintiff's motions.The shipment of sorghum that is at issue in this case departed for Dubai on July 27, 2005, and arrived in Mombasa on August 7, 2005.Defs.'Mem. 11.

II.The Parties' Arguments

The plaintiff's central argument is that the USAID's decision to invoke the emergency assistance provision of 7 U.S.C. § 1722(a)(2000) and bypass the requirements of the CPA, was arbitrary and capricious under the APA.Pl.'s Mem.at 1.The plaintiff relies on several omissions in the USAID's decision making process to support this argument.Id. at 14-17.First, the plaintiff opines that the decision was erroneous because the USAID failed to determine whether ACT's freight rate was "unfair or unreasonable" under the applicable CPA regulation, 46 C.F.R. § 382.3. Pl.'s Mem.at 14.In fact, the plaintiff notes that the MARAD determined that a fair and reasonable price would have been $300.31 per metric ton, a price higher than ACT's bid of $298 per metric ton.Id. at 9;see alsoAdmin. R.at 100-101(showing the MARAD's calculations).Second, the plaintiff challenges the USAID's articulated reason...