Shipbuilders Council of Am. v. United States Dep't of Homeland Sec.

• Decision Date: 17 March 2011
• Docket Number: No. 1:07cv665 (LMB/TRJ).,1:07cv665 (LMB/TRJ).
• Citation: 2011 A.M.C. 1102,770 F.Supp.2d 793
• Parties: SHIPBUILDERS COUNCIL OF AMERICA, et al., Plaintiffs,v.UNITED STATES DEPARTMENT OF HOMELAND SECURITY, et al., Defendants,Seabulk Energy Transport, Inc., et al., Intervenor Defendants.
• Court: U.S. District Court — Eastern District of Virginia

770 F.Supp.2d 793

2011 A.M.C. 1102

SHIPBUILDERS COUNCIL OF AMERICA, et al., Plaintiffs,

v.UNITED STATES DEPARTMENT OF HOMELAND SECURITY, et al., Defendants,Seabulk Energy Transport, Inc., et al., Intervenor Defendants.

No. 1:07cv665 (LMB/TRJ).

United States District Court, E.D. Virginia,Alexandria Division.

March 17, 2011.

Donald Jeffrey Kassilke, Sher & Blackwell LLP, Rolf Marshall, K & L Gates, Washington, DC, William David Dolan, III, Michael W. Robinson, Venable LLP, Vienna, VA, Bernard Joseph Dimuro, Dimuro Ginsberg & Mook P.C., Alexandria, VA, for Plaintiffs.Yiris E. Cornwall, Monika L. Moore, U.S. Attorney's Office, Alexandria, VA, for Defendants.Patrick O'Neil Cavanaugh, Blank Rome LLP, Gordon A. Coffee, Winston & Strawn LLP, Washington, DC, for Intervenor Defendants.

MEMORANDUM OPINION

LEONIE M. BRINKEMA, District Judge.

Plaintiffs Shipbuilders Council of America, Crowley Maritime Corporation, and Overseas Shipholding Group, Inc. filed this action under the Administrative Procedure Act (“APA”), 5 U.S.C. § 701 et seq., challenging a decision by the United States Coast Guard's National Vessel Documentation Center (“Coast Guard”) ¹ to issue a coastwise endorsement to the oil tanker Seabulk Trader after work was completed on the vessel in a foreign shipyard.² The owners of the vessel—Seabulk Energy Transport, Inc. and Seabulk Petroleum Transport, Inc. (collectively “Seabulk”)—have intervened as defendants in this action.

After several rounds of proceedings before the Coast Guard, this Court, and the United States Court of Appeals for the Fourth Circuit, plaintiff Overseas Shipholding Group, Inc. (“OSG”) returns to this Court to challenge the Coast Guard's most recent determination that certain piping and valve work done on the Seabulk Traderto convert several cargo tanks into segregated ballast tanks was not a prohibited foreign “installation” of such tanks, in violation of 46 U.S.C. § 3704.

Plaintiff OSG has filed a Motion for Summary Judgment [Dkt. No. 214], asking this Court to overturn the Coast Guard's determination as “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” 5 U.S.C. § 706(2)(A), and to remand the case to the Coast Guard with instructions to revoke the Seabulk Trader's coastwise endorsement. Defendants National Vessel Documentation Center, the Coast Guard, and the United States Department of Homeland Security have also filed a Motion for Summary Judgment [Dkt. No. 217], as have intervenor defendants Seabulk [Dkt. No. 220].

For the reasons stated in this Memorandum Opinion, plaintiff's motion will be denied, and the defendants' and intervenor defendants' motions will be granted.

I. Background

A. Statutory and Regulatory Framework

In its role as the federal agency with the power to administer vessel documentation laws, the United States Coast Guard regulates the issuance of “certifications of documentation” to vessels that participate in coastwise trade, or domestic shipping trade between points within the United States. The Coast Guard's decision in this case to issue such a certification of documentation with a coastwise endorsement to the Seabulk Trader implicates several intersecting federal statutes. Those statutes, among other things, govern vessel specifications and safety standards and seek to protect the economic interests of United States shipyards.

Under the first of those statutes, the Merchant Marine Act of 1920, commonly known as the Jones Act, only vessels that maintain a “coastwise endorsement” may engage in coastwise trade— i.e., trade “between points in the United States.” 46 U.S.C. § 55102(b). The Second Proviso to the Jones Act permanently disqualifies from coastwise service any otherwise eligible vessel that is “later rebuilt outside the United States.” See id. § 12132(b). The Jones Act is an avowedly protectionist statute, which Congress enacted “in an attempt to protect the American shipping [and shipbuilding] industry against foreign competition.” OSG Bulk Ships, Inc. v. United States, 132 F.3d 808, 809 (D.C.Cir.1998). Accordingly, “a vessel is deemed to have been rebuilt in the United States only if the entire rebuilding, including the construction of any major component of the hull or superstructure, was done in the United States.” 46 U.S.C.A. § 12101(a).

The Jones Act itself does not define the terms “rebuilt” or “rebuilding.” Rather, the task of clarifying those terms was left to the supervising agency—first the Secretary of the Treasury, and now the Coast Guard. See Am. Haw. Cruises v. Skinner, 713 F.Supp. 452, 464 (D.D.C.1989). In 1996, the Coast Guard issued regulations for determining when a vessel has been “rebuilt” outside of the United States. Those regulations require a determination as to whether any “major component” has been added to the vessel, and whether work has been performed on a “considerable part” of the vessel's hull or superstructure:

A vessel is deemed rebuilt foreign when any considerable part of its hull or superstructure is built upon or substantially altered outside of the United States. In determining whether a vessel is rebuilt foreign, the following parameters apply:

(a) Regardless of its material of construction, a vessel is deemed rebuilt when a major component of the hull or superstructure not built in the United States is added to the vessel.

(b) For a vessel of which the hull and superstructure is constructed of steel or aluminum—

(1) A vessel is deemed rebuilt when work performed on its hull or superstructure constitutes more than 10 percent of the vessel's steelweight, prior to the work, also known as discounted lightship weight.

(2) A vessel may be considered rebuilt when work performed on its hull or superstructure constitutes more than 7.5 percent but not more than 10 percent of the vessel's steelweight prior to the work.

(3) A vessel is not considered rebuilt when work performed on its hull or superstructure constitutes 7.5 percent or less of the vessel's steelweight prior to the work.

46 C.F.R. § 67.177(a)-(b).

In addition to these general statutory and regulatory provisions governing all coastwise vessels, the Oil Pollution Act of 1990 (“OPA”) provides that all oil tankers in the coastwise trade must be “equipped with a double hull” or be phased out of service by a specified date. 46 U.S.C. § 3703a(a). The OPA was passed in response to the devastating Exxon Valdez oil spill in Prince William Sound, Alaska, and requires all existing single-hull vessels to be retrofitted with double hulls to remain qualified to operate on waters subject to United States jurisdiction. See id. § 3703a(c); see also Maritrans Inc. v. United States, 342 F.3d 1344, 1348 (Fed.Cir.2003) (explaining that a “double hull design provides a reinforced hull in order to minimize the impact of punctures and hull damage”). Single-hull vessels that do not undergo the required retrofitting must be phased out pursuant to the retirement schedule in the statute.

Finally, the Port and Tanker Safety Act of 1978 (“PTSA”) requires that certain tank and product vessels be equipped with “segregated ballast tanks.” See 46 U.S.C. §§ 3705, 3706.³ The statute was specifically enacted to protect against a major source of pollution—the practice of filling empty oil cargo tanks with sea water for ballast and then discharging the oil-contaminated contents into the sea. See Pub. L. No. 95–474, 92 Stat. 1471 (Oct. 17, 1978); H.R. Rep. 95–1384(I), 1978 U.S.C.C.A.N. 3270 (July 21, 1978). To halt that practice, the PTSA requires vessels to have a certain ratio of ballast tanks to oil cargo tanks, and further requires those ballast tanks to be “segregated” from the oil tanks, such that they are permanently allocated to carry only ballast water. See 46 U.S.C. §§ 3701(3); 3706(a); see also 33 C.F.R. §§ 157.03; 157.10d(b)(2).

Moreover, for those vessels engaged in coastwise trade, the PTSA mandates that all segregated ballast tanks required by the statute must be installed in the United States:

A segregated ballast tank, a crude oil washing system, or an inert gas system, required by this chapter or a regulation prescribed under this chapter, on a vessel entitled to engage in the coastwise trade under chapter 551 of this title shall be installed in the United States (except the trust territories). A vessel failing to comply with this section may not engage in the coastwise trade.

46 U.S.C. § 3704. As with the Second Proviso of the Jones Act, 46 U.S.C. § 3704 is a protectionist provision. It is the proper interpretation of that provision—and in particular, the definition of a prohibited foreign “install[ation]”—that is presently at issue in this litigation.

B. Seabulk Trader Retrofitting

The Seabulk Trader is an oil tanker owned by Seabulk and used exclusively in the coastwise trade. The Seabulk Trader was built in 1981, after the PTSA was enacted, and therefore satisfied the PTSA's requirements concerning the installation of segregated ballast tanks when it was first built. See Admin. Record [“A.R.”] at 47.⁴ However, the OPA, passed in 1990, required the Seabulk Trader to be retrofitted and equipped with a double hull, or to be phased out of service by 2011. See 46 U.S.C. § 3703a. Accordingly, to keep the vessel in the coastwise service, Seabulk sought to meet the OPA's requirements by converting the vessel's double bottom and single side to a configuration that would fully meet the technical double hull specifications of the OPA. See A.R. at 2.

On March 11, 2005, Seabulk submitted a request to the Coast Guard, seeking a preliminary determination of whether the work it proposed to undertake to retrofit the Seabulk Trader could be performed in a foreign shipyard, or whether such foreign work would adversely affect the vessel's coastwise trade eligibility. Specifically, Seabulk sought a preliminary ruling that its proposed work on the Seabulk Trader in a Chinese shipyard would not result in a finding (1) that the vessel was ...