American Trading Transp. Co., Inc. v. U.S., 85-5697

• Decision Date: 23 May 1986
• Docket Number: No. 85-5697,85-5697
• Citation: 791 F.2d 942
• Parties: AMERICAN TRADING TRANSPORTATION COMPANY, INC., et al., Appellants, v. UNITED STATES of America, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 942

791 F.2d 942

253 U.S.App.D.C. 40

AMERICAN TRADING TRANSPORTATION COMPANY, INC., et al., Appellants, v. UNITED STATES of America, et al.

No. 85-5697.

United States Court of Appeals District of Columbia Circuit.

Argued Feb. 7, 1986.

Decided May 23, 1986.

Jeffrey R. Masi, with whom Anne E. Mickey and Linda L. Martin, Washington, D.C., were on brief, for appellants.

Michael J. Ryan, Asst. U.S. Atty., for appellee, United States of America, with whom Joseph E. diGenova, U.S. Atty., Royce C. Lamberth, R. Craig Lawrence and John H.E. Bayly, Jr., Asst. U.S. Attys., Washington, D.C., were on brief, for appellee, United States of America.

William E. McDaniels, with whom Kevin T. Baine, Jonathan Blank and John W. Angus, III, Washington, D.C., were on brief, for appellees, Seatrain Lines, Inc., et al.

Richard H. Saltsman, Washington, D.C., was on brief, for appellees, Archon Shipping, Inc., et al.

Before ROBINSON, Chief Judge, and GINSBURG and SILBERMAN, Circuit Judges.

Opinion for the Court filed by Circuit Judge GINSBURG.

Dissenting opinion filed by Circuit Judge SILBERMAN.

GINSBURG, Circuit Judge:

Appellants are owners and operators of small, unsubsidized vessels engaged in the Alaskan oil trade. They challenge a Maritime Administration (Marad) waiver decision which temporarily allowed two subsidized, very large crude carriers (VLCCs) to operate in this domestic Alaskan trade. The district court denied appellants' request for a preliminary injunction and simultaneously granted Marad's motion for summary judgment. See American Trading Transportation Co. v. United States, 610 F.Supp. 457 (D.D.C.1985). We conclude that, in granting the permission appellants challenge, Marad interpreted its waiver regulation in a manner inconsonant with the governing statute. We therefore vacate the judgment summarily entered against appellants and instruct the district court to return the case to Marad for further consideration consistent with this opinion.

I.

The Merchant Marine Act of 1936, 46 U.S.C. Sec. 1101 et seq. (1982) (the Act), was enacted to promote a well-equipped and efficient merchant fleet owned and operated by United States citizens and supported by domestic shipbuilding and repair facilities. See id. at Sec. 1101. To advance these purposes, the Act requires every vessel sailing under this nation's flag to be owned by United States citizens, and staffed by a domestic crew. See id. at Secs. 65b, 1132(a). The construction and operation costs of United States ships, however, are substantially higher than those of their foreign counterparts; for this reason, U.S.-flag vessels would not be positioned to contend with foreign-flag vessels in offering shipping services, absent government intervention or protection. Congress therefore created two separate programs to shelter U.S.-flag ships.

First, the "Jones Act," as it is popularly known, restricts the domestic trade--the carriage of goods between ports in the United States--to U.S.-flag vessels built in the United States. See 46 U.S.C. Sec. 883. ¹ The subsidized ships, because of their cost-structure advantage over unsubsidized U.S.-flag vessels, are prohibited from engaging in the domestic trade except under narrow, specified circumstances. See 46 U.S.C. Sec. 1156. This case involves an excepted circumstance. The statutory exception at issue allows the Secretary of Transportation to approve a temporary waiver of the domestic trade ban for a particular subsidized vessel, for a period not to exceed six months in each year, if consent to the temporary transfer is "necessary or appropriate to carry out the purposes of this [Act]." Id. The consent to transfer is conditioned upon the repayment of a proportionate share of the construction-differential subsidy and the forfeiture of any operating subsidy during the period of domestic employment. See id.; see also id. at Sec. 1175(a). ² The Secretary delegated this waiver power to Marad.

                Thus protected from low-cost foreign competition, these ships are otherwise unsubsidized.  Second, the Merchant Marine Act provides for subsidies to offset the higher costs of building (construction-differential program) and operating (operating-differential program) in the United States.  See id. at Secs. 1151 et seq., 1171et seq.    Ships constructed and operated with the aid of these subsidies are positioned to compete with foreign-flag ships and therefore ply the foreign trade
                

In 1977, Marad issued a regulation to guide certain exercises of its waiver power. See 42 Fed.Reg. 33035 (1977) (codified at 46 C.F.R. Part 250). The regulation applies only to waivers for subsidized ships over 100,000 deadweight tons (dwt) to participate in the longest leg of the Alaskan oil trade: from Valdez, Alaska to the Panama Canal. See 46 C.F.R. Part 250 (1985). The regulation is primarily procedural: it details the information a waiver application must include; and it contains a timetable for comments by interested persons, replies by the applicant, and a decision by Marad. See id. at Secs. 250.3, 250.4. Any "competitor" may file a formal protest, and Marad is obliged to consider objections so presented. See id. at Sec. 250.4. A "competitor" is defined by the regulation as the owner or operator of an unsubsidized U.S.-flag vessel eligible for operation in the domestic trade. See id. at Sec. 250.2(c).

The regulation sets forth no substantive criteria controlling Marad's appraisal of a waiver application. Marad has stated, however, that it follows the standard contained in Sec. 506 of the Act; that provision instructs the administrator to determine whether the consent to transfer is "necessary or appropriate to carry out the purposes of this Act." See Opinion of the Maritime Administration on Approving Two Applications and Denying One Application at 43, reprinted in Joint Appendix (J.A.) at 64 [hereinafter cited as Marad Opinion].

An additional, more precise criterion may be derived from the regulation's instruction that, to qualify for a waiver, an applicant must aver that "suitable vessels of a competitor would not be available." See 46 C.F.R. Sec. 250.3(d). Marad has apparently interpreted this provision as according to "suitable" unsubsidized vessels an absolute veto over any waiver for a time period In the waiver proceeding at issue, Marad accepted applications from three subsidized VLCCs. ³ Upon issuing a public notice, Marad promptly received comments and protests from the owners of many unsubsidized vessels, some larger than 100,000 dwt and some smaller. After a round of responses, counter-responses, and rebuttals, Marad granted waivers to two of the applicants. See Marad Opinion at 59-61, reprinted in J.A. at 80-82.

during which such vessels are or will be unemployed. See Brief for Seatrain et al. at 26-27; cf. Atlantic Richfield Co. v. United States, 774 F.2d 1193, 1204 (D.C.Cir.1985) (holding that it was "appropriate" for Marad to condition a waiver on the continued unavailability of suitable unsubsidized vessels). The regulation defines a "suitable" vessel as one 100,000 dwt or larger and qualified to participate in the domestic trade. See 46 C.F.R. Sec. 250.2(h).

The small, unsubsidized tankers--the appellants in this case--argued to Marad that its regulation was substantively and procedurally invalid. They contended that their competitive interests should be considered and that those interests warranted denial of the waiver applications. See Marad Opinion at 12-13, reprinted in J.A. at 33-34. In response, Marad stated that its regulation had been promulgated pursuant to correct procedures and that substantive guidelines were not needed in the regulation because they were supplied by the Act itself. See id. at 43, reprinted in J.A. at 64. The agency then swiftly rejected the protests of vessels under 100,000 dwt; such vessels, Marad declared, lacked "standing" to protest. See id. at 51-56, reprinted in J.A. at 72-77.

For the ruling that the small vessels had no standing to complain, Marad relied upon a line of its own decisions dismissing protests of vessels under 100,000 dwt because they failed to qualify as "suitable" vessels for the Alaska-Panama trade and, therefore, were not within the category of "competitors" authorized to protest under the regulation. See id. The agency then recited evidence indicating that vessels under 100,000 dwt are less suitable for this particular long voyage and that such vessels, in fact, account for only a small part of that trade even when no subsidized ships participate. See id. Next, without discussing the substance of the small vessels' protest, Marad concluded that waivers for two subsidized VLCC's were necessary and appropriate to serve the purposes of the Act. See id. at 58-61, reprinted in J.A. at 79-82. ⁴

The owners of the small, unsubsidized tankers sought review in the district court. That court granted summary judgment for Marad. It held that appellants could not challenge the procedural regularity of the rule's promulgation seven years after the fact, see American Trading, 610 F.Supp. at 461-62, reprinted in J.A. at 90-91, and that the tonnage limitation (100,000 dwt) had not been shown to be arbitrary, capricious, or inconsistent with the statute, see id. at 462-63, reprinted in J.A. at 92-93. ⁵

II.

We turn first to the question whether the owners of small, unsubsidized tankers have "standing" under Marad's regulation to protest a waiver application. Marad's position on this issue is an enigma. The agency's opinion in this case includes a statement that owners of tankers under 100,000 dwt do not have standing to protest. See Marad Opinion at 51-52, reprinted in J.A. at 72-73. Presumably for this reason, Marad refused to confront and rule on the substance of appellants' protests. In a cryptic footnote to its opinion, however, Marad offered this second thought: "[T]hese protestors can and obviously do participate to some extent in the agency action but under the rule they...