Shipbuilders Council of America v. Us Coast Guard
| Decision Date | 21 August 2009 |
| Docket Number | No. 08-1702.,No. 08-1546.,08-1546.,08-1702. |
| Citation | 578 F.3d 234 |
| Parties | SHIPBUILDERS COUNCIL OF AMERICA, Incorporated; Crowley Maritime Corporation; Overseas Shipholding Group, Incorporated, Plaintiffs-Appellees, v. UNITED STATES COAST GUARD; United States Department of Homeland Security; National Vessel Documentation Center, Defendants-Appellants, Seabulk Petroleum Transport, Incorporated; Seabulk Energy Transport, Incorporated, Intervenors/Defendants-Appellants, and US Shipping Partners LLP, Intervenor/Defendant, Matson Navigation Company, Incorporated, Amicus Supporting Appellants. Shipbuilders Council of America, Incorporated; Crowley Maritime Corporation; Overseas Shipholding Group, Incorporated, Plaintiffs-Appellees, v. United States Coast Guard; United States Department of Homeland Security; National Vessel Documentation Center, Defendants-Appellants, Seabulk Petroleum Transport, Incorporated; Seabulk Energy Transport, Incorporated, Intervenors/Defendants-Appellants, and US Shipping Partners LLP, Intervenor/Defendant, Matson Navigation Company, Incorporated, Amicus Supporting Appellants. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Monika L. Moore, Office of the United States Attorney, Alexandria, Virginia; Michael Joseph, Blank & Rome, LLP, Washington, DC, for Appellants. William D. Dolan, III, Venable, LLP, Vienna, Virginia, for Appellees.
ON BRIEF:
Dana J. Boente, Acting United States Attorney, Alexandria, Virginia, for Appellants United States Coast Guard, United States Department of Homeland Security, and National Vessel Documentation Center. Alex Blanton, Blank & Rome, LLP, Washington, D.C., for Appellants Seabulk Petroleum Transport, Incorporated and Seabulk Energy Transport, Incorporated. Marc J. Fink, Anne E. Mickey, Robert Magovern, Sher & Black-Well, LLP, Washington, D.C., for Appellee Shipbuilders Council of America, Incorporated; Michael W. Robinson, John F. Cooney, Venable, LLP, Vienna, Virginia, for Appellee Crowley Maritime Corporation; Bernard J. DiMuro, Dimuroginsburg, PC, Alexandria, Virginia, for Appellee Overseas Shipholding Group, Incorporated. Gene C. Schaerr, Constantine G. Papavizas, Andrew C. Nichols, Winston & Strawn, LLP, Washington, D.C., for Amicus Supporting Appellants.
Before MOTZ, KING and DUNCAN, Circuit Judges.
Reversed and remanded by published opinion. Judge DUNCAN wrote the opinion, in which Judge MOTZ and Judge KING joined.
The United States Coast Guard appeals the district court's rejection of its interpretation of the regulatory scheme governing the issuance of coastwise endorsements to vessels. Intervenors Seabulk Energy Transport, Inc. and Seabulk Petroleum Transport, Inc. (collectively "Seabulk") also appeal. We find that we have jurisdiction under the collateral order doctrine over the district court's ruling on the issue appealed by the Coast Guard because it would bind the agency on remand. On the merits, we hold that the district court erred in rejecting the Coast Guard's interpretation of its own regulations. We further find that the district court erred in ordering Seabulk to provide security during the course of these proceedings. The judgment of the district court is therefore reversed and the case remanded for further proceedings.
In its role as the federal agency with the power to administer the vessel documentation laws, the United States Coast Guard regulates the issuance of certifications to vessels that participate in nautical trade between points in the United States, also known as coastwise trade. This responsibility includes overseeing a network of intersecting federal statutes that govern vessel specifications and safety and that also seek to protect the economic interests of U.S. shipyards. The earliest statute on point, the Jones Act, was enacted in 1920 and restricts the coastwise trade to vessels built in the United States and owned by U.S. citizens. 46 U.S.C. § 55102 (formerly at 46 U.S.C. app. § 883). In 1956 and 1960, Congress passed and then amended the Second Proviso to the Jones Act, which was intended to shore up the Act's protections for U.S. shipyards. Pub.L. No. 84-714, 70 Stat. 544 (1956) (Second Proviso) (currently codified as amended at 46 U.S.C. § 12132(b) and 46 U.S.C. § 12101(a)); Pub.L. No. 86-583, 74 Stat. 321 (1960) (amendment). The Jones Act and its Second Proviso govern the Coast Guard's issuance of certifications that license vessels for coastwise trade ("coastwise endorsements").
In addition to these general statutory provisions, the Oil Pollution Act of 1990 ("OPA 90") provides that all oil tankers in the coastwise trade must be equipped with double hulls by a specified date. 46 U.S.C. § 3703a(a). Absent a double hull, vessels are not eligible to operate in United States waters. 46 U.S.C. § 3703a(a)(2). Among the vessels that needed to be brought into compliance with the requirements of OPA 90 was the Seabulk Trader ("the Trader"), a tanker owned by Seabulk and used exclusively in the coastwise trade. In order to conform to OPA 90, the Trader needed a double hull installed, and Seabulk sought to conduct the work on the hull in China. However, under federal law, in order to maintain a coastwise endorsement a vessel must not be "rebuilt outside the United States." 46 U.S.C. § 12132; 46 U.S.C. § 12101. Pursuant to Coast Guard regulations, 46 C.F.R. § 67.177(g), Seabulk submitted a request to the agency for a preliminary determination of whether the work it proposed to undertake on the Trader would constitute a foreign rebuilding and therefore disqualify the vessel from maintaining its coastwise endorsement. Seabulk also requested a determination of whether proposed alterations to the vessel's ballast tanks would violate the Port and Tanker Safety Act of 1978, 46 U.S.C. § 3704. Based upon the information Seabulk provided, the Coast Guard issued a preliminary determination that the work would not constitute a foreign rebuilding or a prohibited foreign installation of required ballast tanks.
Following that issuance, the Trader did undergo work in China, which consisted of the construction of an "internal hull" that would provide the vessel with a full double hull and reconfiguration of the vessel's ballast tank system. In total, the work constituted 8.15% of the Trader's pre-modification steelweight. J.A. at 233. After completion of the work, Seabulk applied for and was granted a coastwise endorsement for the Trader. J.A. at 30.
In considering whether the Trader could maintain its coastwise endorsement following the work on its hull, the Coast Guard applied the federal regulation created to implement the Second Proviso, 46 C.F.R. § 67.177. The regulation sets out a comprehensive scheme for determining whether work done in a foreign shipyard constitutes a foreign rebuilding. Work can constitute a foreign rebuild if it consists of either: (1) the addition of a major component to a vessel's hull (the "major component test"); or (2) the construction of a considerable part of the hull (the "considerable part test").
In applying the regulation, the Coast Guard determined which test applied to the work done on the Trader by assessing whether the added steel composed a separable component before its addition, in which case it would be assessed under the major component test, or was not a discrete separable component, in which case it would be assessed under the considerable part test. This parsing between separable and inseparable additions ("the separable/inseparable distinction") was therefore integral to the agency's interpretation of both the major component and the considerable part tests.
The Coast Guard concluded that while the work on the Trader's hull brought it under the auspices of the Jones Act, the construction did not qualify as a foreign rebuild under the applicable administrative regulations. Ruling that the installation of the inner hull on the Trader did not consist of the addition of a separable component, the Coast Guard assessed the installation of the inner hull under the considerable part test. Because the added portions of the hull did not exceed the 10% threshold of added steelweight set forth in the administrative regulation, 46 C.F.R. § 67.177(b), the Coast Guard determined that the Trader had not been rebuilt foreign and therefore could be issued a coastwise endorsement.
Appellees, the Shipbuilders Council of America ("Shipbuilders"), brought suit in the district court to challenge the Coast Guard's issuance of a coastwise endorsement to the Trader. Shipbuilders contended that the tanker was no longer eligible to operate in the coastwise trade because the work done in the Chinese shipyards: (1) constituted a foreign rebuild of the ship in violation of the Second Proviso of the Jones Act, 46 U.S.C. § 12132(b); and (2) included a foreign installation of segregated ballast tanks in violation of the Port and Tanker Safety Act of 1978, 46 U.S.C. § 3704. Seabulk, as the owner of the Trader, intervened in the district court action.
In the district court, Shipbuilders challenged the Coast Guard's grant of the coastwise endorsement as arbitrary and capricious, an abuse of discretion, and contrary to law under the Administrative Procedure Act. 5 U.S.C. § 706. The Coast Guard claimed that the district court had no jurisdiction over the Jones Act claim because the language of the statute was so broad as to preclude meaningful judicial review. The district court disagreed, finding that the language of the Jones Act did not preclude the court's review. The district court then addressed the two determinations by the Coast Guard: (1) that the Trader was not rebuilt foreign; and (2) that it did not improperly have segregated ballast tanks installed in a foreign shipyard.
The district court declined to give deference to the Coast Guard's stated rationale for not applying the major component test to the work on the Trader, finding that...
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