Shipbuilders Council v. U.S. Dept. of Homeland

• Court: U.S. District Court — Eastern District of Virginia
• Writing for the Court: Ellis
• Citation: Shipbuilders Council v. U.S. Dept. of Homeland, 481 F.Supp.2d 550 (E.D. Va. 2007)
• Decision Date: 06 April 2007
• Docket Number: No. 1:06cv1297.,1:06cv1297.
• Parties: SHIPBUILDERS COUNCIL OF AMERICA, INC., et al., Plaintiffs, v. U.S. DEPARTMENT OF HOMELAND SECURITY, et al., Defendants, Matson Navigation Company, Inc., Intervenor-Defendant.

481 F.Supp.2d 550

SHIPBUILDERS COUNCIL OF AMERICA, INC., et al., Plaintiffs, v. U.S. DEPARTMENT OF HOMELAND SECURITY, et al., Defendants Matson Navigation Company, Inc., Intervenor-Defendant.

No. 1:06cv1297.

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

April 6, 2007.

George Andrew Hawkins, Peterson Noll & Goodman PLC, Vienna, VA, for Plaintiffs.

MEMORANDUM OPINION

ELLIS, District Judge.

At issue in this Administrative Procedure Act ("APA")¹ challenge to agency action is whether the U.S. Coast Guard's ("Coast Guard") preliminary determination that the container vessel modifications proposed by intervenor-defendant Matson Navigation Company, Inc. ("Matson") would not constitute foreign "rebuilding" under the Second Proviso of the Jones Act² is "final agency action," subject to review under the APA, 5 U.S.C. § 704. This issue has been fully briefed and argued, and is now ripe for' disposition. For the reasons that follow, defendants' motion to dismiss for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1), Fed. R.Civ.P., must be granted as the Coast Guard's preliminary rebuild determination does not constitute "final agency action" under the APA, 5 U.S.C. § 704.

I.³

A.

A brief discussion of the Jones Act, and the pertinent implementing regulations, provides important context for understanding and resolving the instant motion. The Jones Act restricts "coastwise trade,"⁴ i.e., trade between points in the United States, to vessels wholly owned by United States citizens that have been issued a certificate of documentation with a Coast Guard coastwise endorsement. See 46 U.S.C. § 55102. Important here is the Jones Act's Second Proviso, which provides that vessels "rebuilt" outside the United States are permanently disqualified from engaging in coastwise trade.⁵ 46 U.S.C. § 12132(b) ("A vessel eligible to engage in the coastwise trade and later rebuilt outside the United States may not thereafter engage in coastwise trade."). And, "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. § 12101(a). Thus, the Jones Act provides that if a vessel is "entirely rebuilt" outside of the Untied States, it is considered to be "rebuilt foreign," and thus, ineligible for coastwise trading privileges. See 46 U.S.C. §§ 12101(a), 12132(b).

In 1996, the Coast Guard, pursuant to the Jones Act, promulgated regulations governing whether a vessel is "rebuilt" outside of the United States. In particular, these regulations provide that a vessel is "rebuilt foreign" (a) when "a major component of the hull or superstructure not built in the United States is added to the vessel" or (b) when work performed on the vessel's hull or superstructure constitutes a "considerable part" of the hull or superstructure. 46 C.F.R. § 67.177(a)-(b). With regard to the latter provision, the Coast Guard has established regulatory thresholds to determine whether proposed work on a vessel constitutes a "considerable part" of the hull or superstructure. Specifically, the following thresholds apply for steel vessels:

(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....

(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.

Id. at § 67.177(b). Furthermore, Coast Guard regulations provide that when a vessel, currently operating with a coastwise endorsement, is altered outside the United States and the alterations either (i) constitute greater than 7.5 percent of the steelweight prior to the work, or (ii) include the addition of a major component of the hull or superstructure not built in the United States, the owner of the vessel must apply for a rebuilt determination within 30 days of the work being completed. Id. at § 67.177(e). In particular, this application must include: a detailed outline of the work performed; calculations showing the actual or comparable steelweight of the vessel before and after the work was performed; accurate sketches or blueprints describing the work performed; and any further submissions requested. Id. In addition, Coast Guard regulations provide that before undertaking any alterations in a foreign shipyard a vessel owner may apply for a "preliminary rebuilt determination" by submitting the information required for a rebuild determination under subsection (e). Id. at § 67.177(g).

Regardless of whether a vessel owner seeks a preliminary rebuilding determination pursuant to § 67.177(g), or a rebuilding determination pursuant to § 46.177(e), a vessel owner must submit an "Application for Initial Issue, Exchange, or Replacement of Certificate of Documentation; Redocumentation," in order to receive a coastwise endorsement from the Coast Guard. In doing so, the applicant must certify that the vessel has not been "rebuilt" under the Jones Act. Once the vessel owner does so, the Coast Guard approves the application by issuing a coastwise endorsement authorizing the vessel to engage in coastwise trade.

B.

Two plaintiffs brought this action: Pasha Hawaii Transport Lines, LLC ("PHTL"), a California limited liability company that operates vessels engaged in coastwise trade, and Shipbuilders Council of America ("SCA"), a Virginia corporation and the largest national trade association representing the United States' shipyard industry.

These plaintiffs named three defendants: the Department of Homeland Security ("DHS"), the department of the United States government responsible for administering certain aspects of the Jones Act; the Coast Guard, the component of DHS responsible for administering certain aspects of the Jones Act; and the National Vessel Documentation Center, a unit of the Coast Guard responsible for making rebuild determinations under § 67.177.⁶ In addition, Matson, a California corporation, which owns and operates vessels engaged in domestic coastwise trade, including the vessel that is the subject of the preliminary rebuilt determination considered here, was allowed to intervene as a defendant-intervenor, pursuant to Rule 24(a), Fed.R.Civ.P. Shipbuilders Council of America, Inc. v. U.S. Department of Homeland Security, No. 1:06cv1297 (Jan. 19, 2007) (Order).

By letter to the Coast Guard dated June 15, 2004, Matson requested a "preliminary rebuilding determination," pursuant to §, 67.177(g), for three of its vessels, the M/V Mokihana, Mahimahi, and M/V/Manoa, slated to undergo alterations partly in the Untied States and partly in. China. In this letter, Matson described the proposed alterations and requested a "preliminary determination that the proposed work does not constitute a `foreign rebuilding'" for purposes of the Jones Act. As required by § 67.177(g), the letter detailed the proposed overseas work, submitted steelweight calculations relevant to the Coast Guard's rebuild inquiry, and included sketches of the proposed work.

On June 23, 2004, the Coast Guard responded to Matson's request by stating that the proposed alterations to be performed in China amounted to 6.7 percent of the vessels' steelweight, thus falling within the threshold of "clearly permissible work," that is, below the 7.5 percent regulatory threshold. Accordingly, the Coast Guard confirmed Matson's "understanding that the work described in [Matson's] submission ... will not result in a finding that the Vessels have been rebuilt" foreign and, therefore, "[t]he work described will not result in the loss of coastwise privileges." The Coast Guard, then cautioned Matson that the June 23, 2004 letter "is a preliminary determination based upon the estimates provided." It went on to explain that if the proposed work were modified, the work to be conducted overseas might no longer fall below the regulatory threshold of "clearly permissible work," in which case Matson would be required to apply for a final determination, pursuant to § 67.177(e). In addition, on November 17, 2005, the Coast Guard wrote Matson requesting "written confirmation upon completion of each of the rebuilds at issue in the event it is determined that the actual steel work performed did NOT exceed the anticipated thresholds." Thus, the Coast Guard made clear that following the completion of the alterations on the three vessels, Matson was required. (i) to submit written confirmation that the alterations actually performed did not exceed the 7.5 percent threshold of "clearly permissible work"⁷ or (ii) to submit a final rebuild determination, pursuant to 46 C.F.R. § 67.177(e), in the event that the actual alterations exceeded the 7.5 percent threshold.

As Matson's designs crystallized, Herbert Engineering Corporation ("Herbert"), the corporation designing a garage to be placed on the three vessels, wrote the Coast Guard on April 25, 2005, seeking a preliminary rebuild determination to confirm its understanding that certain proposed work would be considered "outfitting" work, excluded from the steelweight calculation. On June 8, 2005, after Herbert submitted additional design details, the Coast Guard responded to Herbert, stating that one of the proposed alterations would not be considered outfitting, and thus would be included in, the steelwork calculations.

The following year, in an October 26, 2006 letter, Matson advised the Coast Guard that it would not pursue the proposed rebuilds of the M/V Mahimahi and M/V/ Manoa. In the same letter, Matson sought another "preliminary rebuild determination" that the M/V Mokihana's proposed alterations would not constitute "foreign...