City of Milwaukee, Wis. v. Block, 85-C-1509.
| Decision Date | 15 June 1988 |
| Docket Number | No. 85-C-1509.,85-C-1509. |
| Citation | 688 F. Supp. 479 |
| Parties | CITY OF MILWAUKEE, WISCONSIN, et al., Plaintiffs, v. John R. BLOCK, in his official capacity as Secretary of the United States Department of Agriculture and as Chairman of the USDA Commodity Credit Corporation, et al., Defendants, and Transportation Institute, et al., Defendants-Intervenors. |
| Court | U.S. District Court — Eastern District of Wisconsin |
Grant F. Langley, City of Milwaukee, City Atty., Milwaukee, Wis., Robert E. Jensen, George D. Baker, Williams and Jensen, P.C., Washington, D.C., for plaintiffs.
Ann M. Kisting, Asst. U.S. Atty., Milwaukee, Wis., Dennis G. Linder, Dina R. Lassow, U.S. Dept. of Justice, Civil Div., Washington, D.C., for defendants.
Jonathan Blank, Kathryn P. Broderick, Preston, Thorgrimson, Ellis & Holman, Washington, D.C., for defendants-intervenors.
DECISION AND ORDER
The Cargo Preference Act of 1954, 46 U.S.C.App. § 1241(b), (1970, West Supp. 1987), and its 1985 amendment, 46 U.S.C. § 1241f, require that whenever the federal government contracts to purchase and transport agricultural commodities to overseas nations, the federal agencies involved are to make certain that up to 75 percent of the commodities will 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 cargos by geographic areas...." The Act has potentially grave ramifications for the Great Lakes shipping industry since, with rare exceptions, United States-flag commercial vessels do not serve the Great Lakes. The case now before the Court involves a statutory and constitutional challenge to the application of the Act to Title II of the Agricultural Trade Development and Assistance Act of 1954, 7 U.S.C. §§ 1721-1726b (also called "P.L. 480"). In particular, the dispute centers on the meaning and application of the Cargo Preference Act's "available" phrase (also called the "Availability Clause"). Plaintiffs, representing various Great Lakes shipping interests, contend that the term exempts the application of the Act from the individual ports of the Great Lakes since no United States-flag ships are available. Defendants (officials of various federal government agencies) and defendant intervenors (representing United States-flag interests) oppose such an interpretation and seek to uphold the current application of the Act to Title II shipments. That current application considers availability on a national basis and makes no exception for Great Lakes shipping.
Based on the decision below, the Court finds that the plain language of the Cargo Preference Act does not require that the Availability Clause be applied on a nationwide or port-by-port basis; rather, the Act requires availability to be considered by "geographic areas."
The eighteen plaintiffs in this action include four operators of Great Lakes ports; six labor unions representing longshoremen working the harbor facilities of various Great Lakes ports; four stevedoring service and terminal operation companies servicing Great Lakes ports; one trade association representing various Great Lakes shipping interests; and two foreign-flag shippers and their agent.
The nine government defendants are officials of various federal agencies responsible for administering the provisions of Title II at issue here. They are sued in their official capacities.
The five defendant-intervenors consist of four companies operating United States-flag vessels or organizations with member companies operating United States-flag vessels, and one labor union representing seamen working aboard United States-flag vessels engaged in the United States foreign and domestic shipping trade.
The Cargo Preference Act was enacted to foster and preserve a strong United States merchant marine by aiding the United States-flag operators in their competition with lower cost foreign-flag vessels.2 H.R.Rep. No. 2329.83 Cong., 2d Sess. 1 (1954), U.S.Code Cong. & Admin.News, 1954 p. 3173. The Act seeks to achieve this purpose by requiring as follows:
Whenever the United States shall procure, contract for, or otherwise obtain for its own account, or shall furnish to or for the account of any foreign nation without provision for reimbursement, any ... commodities, within or without the United States, or shall advance funds or credits or guarantee the convertibility of foreign currencies in connection with the furnishing of such ... commodities, the appropriate agencies shall take such steps as may be necessary and practicable to assure that at least 50 percentum of the gross tonnage of such ... 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....
The Cargo Preference Act remained substantially unchanged for 30 years following its enactment until December 23, 1985 — seven weeks after this lawsuit's commencement — when the President of the United States signed legislation, formally known as the "Food Security Act of 1985", amending the Cargo Preference Act. Pub.L. 99-198 (1985). Four provisions in this legislation pertained to this litigation. Specifically, in summarized fashion, these four provisions were as follows:
Title XI, Subtitle C of Pub.L. 99-198 (1985) ("The 1985 Amendments").
Title II, P.L. 480 embodies a foreign food donation program by which the United States donates agricultural commodities overseas to curb famine, combat malnutrition, and promote economic and community development in friendly developing countries. See 7 U.S.C. § 1721(a). The President of the United States is authorized to carry out the Title II, P.L. 480 program. Id. Section 1-201 of Executive Order 12220 delegates the Title II, P.L. 480 functions vested in the President to the Director of the United States International Development Cooperation Agency ("IDCA"). 45 Fed.Reg. 44245 (June 27, 1980). The IDCA has internally redelegated these functions to the Agency for International Development ("AID") who, in conjunction with the Commodity Credit Corporation ("CCC"), administers the Title II, P.L. 480 program. In the Title II, P.L. 480 program, the CCC provides requested commodities for donation and pays the costs of acquiring, processing, packaging and transporting the donated commodities from the commodity supplier's plant to the foreign destination. 7 U.S.C. §§ 1721(a), 1723. The Cargo Preference Act applies to the Title II, P.L. 480 program.
The CCC's original procedure used in procuring and allocating to ports the Title II, P.L. 480 commodities was published at 7 C.F.R. Part 1496. These regulations provided that, as a general principle, contracts for the procurement and allocation to ports be awarded on the basis of "lowest landed cost." 7 C.F.R. § 1496.5(a). "Lowest landed cost" was defined as the lowest combined total cost of acquiring the commodities and transporting them to the port of export, plus shipping them across the ocean to the discharge port. 7 C.F.R. § 1496.3(g). However, the following "additional factors" were to be considered in awarding contracts: the availability of ocean service, the adequacy of ocean service, port performance, and transit time.
The underpinnings of this litigation stem from the decision of companies operating United States-flag vessels not to service the Great Lakes ports. Consequently, most shipments from Great Lakes ports are transported on foreign-flag vessels.
In August and September of 1985, because of circumstances depressing the overall United States-flag participation rate in the Title II program, Title II, P.L. 480 cargo destined to Great Lakes ports pursuant to the lowest landed cost formula was diverted by the CCC to coastal ranges serviced by United States-flag vessels. The basic problem requiring such diversion was United States-flag unavailability to Title II destinations, aggravated by increased Title II, P.L. 480 shipments to Africa — a destination serviced only to a limited extent by United States-flag vessels — for famine relief.
Two different diversion techniques were employed. First, commodities were purchased outside of the Midwest, at costs higher than lowest landed cost, putting the commodities in a position for United States-flag transport at ports other than Great Lakes ports. Second, commodities purchased in the...
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