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10/11/85 Atlantic Richfield Company v. United States of America

October 11, 1985

ATLANTIC RICHFIELD COMPANY, APPELLANT, MARYLAND TANKERS, INC

v.

UNITED STATES OF AMERICA, ET AL.; ATLANTIC RICHFIELD COMPANY, MARYLAND TANKERS, INC., APPELLANT,0

v.

UNITED STATES OF AMERICA, ET AL.



Before: WALD, EDWARDS and STARR, Circuit Judges.

UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

Appeals from the United States District Court for the District of Columbia (Civil Action No. 84-00139) 1985.CDC.233

APPELLATE PANEL:

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE EDWARDS

Opinion for the Court filed by Circuit Judge EDWARDS.

EDWARDS, Circuit Judge: Under section 506 of the Merchant Marine Act of 1936 ("the Act"),1 United States-flag ships built with the aid of federal construction subsidies generally are prohibited from entering the domestic shipping trade. However, on occasions, this prohibition is lifted if the Maritime Administration ("MarAd")

consent[s] in writing to the temporary transfer of such [subsidized] vessel to [domestic service] . . . for periods not exceeding six months in any year, whenever [MarAd] may determine that such transfer is necessary or appropriate to carry out the purposes of this act.2

Pursuant to this exception, the appellants, Atlantic Richfield Company and Maryland Tankers, Inc. ("Maryland Tanker"), each received approval from MarAd to enter the Alaskan-Panama Canal domestic oil trade on the condition that four unsubsidized United States-flag ships remain "fixed for suitable employment." At issue in this case is whether the appellants were entitled to an opportunity to contest the termination of their domestic trade approvals when MarAd determined that two unsubsidized ships were no longer "fixed for suitable employment."

The District Court found that the subsidized shippers had no rights to assert under either the Merchant Marine Act, the Administrative Procedure Act or the due process clause of the Fifth Amendment. Although we do not subscribe to all of the reasoning of the District Court, we do agree that the judgment of MarAd must be upheld. We find that MarAd properly concluded that, during the disputed period here in question, the unsubsidized ships were without employment in the trade, and therefore these ships were no longer "fixed for suitable employment." We also hold that MarAd was not required to assess whether the unsubsidized ships were reasonably unemployed before confirming the terminations of the conditional licenses of the subsidized shippers. Accordingly, we affirm. I. BACKGROUND

The Merchant Marine Act of 19363 divides the United States fleet into two classes of vessels: unsubsidized United States-flag ships with the exclusive right to transport merchandise between points in the United States4 and subsidized United States-flag ships limited to foreign shipping.5 Because the costs of building and operating United States-flag ships traditionally have been considerably higher than comparable costs in foreign countries, Congress enacted several statutes for the purpose of protecting the United States shipping industry. With respect to the domestic trade, the Merchant Marine Act of 1920 requires that vessels transporting merchandise in the domestic trade be built in the United States and owned by United States citizens.6

To make United States vessels competitive in foreign shipping, the Merchant Marine Act of 1936 authorizes MarAd to pay a construction-differential subsidy of up to fifty percent of the cost of a vessel built in the United States.7 This subsidy is aimed at equalizing ship construction costs in the United States and foreign countries. However, while offering a possible cure for the problem of foreign competition, the subsidy program also threatened to promote an imbalance among United States shippers in the domestic trade. Consequently, Congress sought to provide the unsubsidized fleet with protection from the competition of CDS-subsidized ships by generally prohibiting CDS-subsidized ships from entering the domestic shipping trade. But, recognizing the possibility that domestic ships may not always be adequate for the demand, the Act also provides MarAd may

consent in writing to the temporary transfer of such [subsidized] vessel to [domestic service] . . . for periods not exceeding six months in any year, whenever [MarAd] may determine that such transfer is necessary or appropriate to carry out the purposes of this Act.8

Under regulations promulgated by MarAd,9 operators of subsidized ships who wish to enter the Alaskan-Panama Canal domestic oil trade must provide MarAd with all available information to support the applicant's assertion that "suitable vessel[s]"10 of a "competitor"11 would not be available to carry the cargo. After reviewing written protests from competitors and responses to the protests from the applicant, MarAd decides whether the applicant's entry into the trade is necessary or appropriate to carry out the purposes of the Act. MarAd generally denies an application if any unsubsidized "suitable vessels" are available to transport the cargo.12

ARCO, Maryland Tanker and Acturus Shipping, Inc. each operate CDS-built very large crude-oil carriers . On August 30, 1983, ARCO requested permission to enter the Alaskan-Panama Canal oil trade for six months beginning in late October or early November. Two weeks later, on September 14, 1983, Maryland Tanker and Acturus Shipping made similar requests. The operators of several unsubsidized vessels protested these applications. The unsubsidized shippers advised MarAd that they had not yet made arrangements for employment of their vessels following the expiration of their current charters. On October 7, 1983, MarAd granted the requests of the subsidized shippers to enter the trade for six months. These ...


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