Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-96-05156/USCOURTS-caDC-96-05156-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 3, 1997 Decided January 16, 1998 

No. 96-5156

OSG BULK SHIPS, INC.,

APPELLANT

v.

UNITED STATES OF AMERICA, ET AL.,

APPELLEES

Appeal from the United States District Court 

for the District of Columbia 

(No. 94cv00006)

Joseph A. Klausner argued the cause for appellant, with 

whom Allan A. Tuttle was on the briefs.

Cynthia A. Schnedar, Assistant U.S. Attorney, argued the 

cause for the federal appellees, with whom Mary Lou Leary,

U.S. Attorney, John D. Bates and R. Craig Lawrence, Assistant U.S. Attorneys, were on the brief. Michael J. Ryan,

Assistant U.S. Attorney, entered an appearance.

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Thomas L. Mills argued the cause for the private appellees, with whom Robert M. Rader, T.S.L. Perlman, Anne E. 

Mickey and John W. Butler were on the joint brief. Richard 

A. Hibey entered an appearance.

T.S.L. Perlman was on the brief for appellee Mormac 

Marine Transport, Inc.

Before: HENDERSON, ROGERS and GARLAND, Circuit Judges.

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge: The Maritime Administration has a 

longstanding interpretation of the Merchant Marine Act 

of 1936 under which any vessel built with the aid of a 

"construction-differential subsidy" from the federal government, and thus limited at least initially to service in foreign 

trade only, can enter domestic trade after the statutorily 

defined economic life of the vessel expires. OSG Bulk Ships, 

Inc. challenged that interpretation in the district court, which 

granted summary judgment to the defendant agency and 

several private defendant-intervenors after concluding that, 

especially in light of a Supreme Court decision that involved a 

closely related issue, the agency's interpretation was unobjectionable. We affirm.

I.

Because building ships and manning them in the United 

States was and remains more expensive than in other countries, Congress enacted the Merchant Marine Act of 1920 

(commonly known as "the Jones Act") and the Merchant 

Marine Act of 1936 ("the 1936 Act") in an attempt to protect 

the American shipping industry against foreign competition. 

See Independent U.S. Tanker Owners Comm. v. Lewis, 690 

F.2d 908, 911-12 (D.C. Cir. 1982). In these acts, Congress 

effectively divided the American commercial shipping fleet in 

twoone fleet for domestic trade and one for foreignand 

took different steps to support each. In the Jones Act, 

Congress limited trade between domestic ports to ships built 

in American shipyards, owned by American citizens, and 

operated under the American flag. See 46 U.S.C. app. § 883 

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(1988). Foreign vessels cannot compete in this domestic 

market with the Jones Act fleet. See id.

American ships operating in trade between foreign and 

domestic ports do not enjoy the same protection from international competition, but in the 1936 Act, Congress instituted 

two types of government subsidies in an attempt to make 

these vessels competitive in the international market: the 

operating-differential subsidy ("ODS") and the constructiondifferential subsidy ("CDS"). See id. §§ 1151, 1171. Under 

the ODS program, the Secretary of Transportation ("the 

Secretary") can grant subsidies to American vessels in foreign trade to offset the higher operating costs these vessels 

generally face compared to their international competitors. 

See id. § 1171. Under the CDS program, the Secretary can 

enter into contracts to subsidize American shipyards' construction of new vessels to be operated under the American 

flag. See id. § 1154.

Because vessels built with the aid of the CDS program 

would have an unfair advantage if allowed to compete directly 

with the unsubsidized Jones Act ships in domestic trade, 

section 506 of the 1936 Act limits CDS-built vessels to operation "exclusively in foreign trade," with two exceptions. Id.

§ 1156.1 First, CDS-built vessels can make certain domestic 

__________

1 Section 506 provides:

Every owner of a vessel for which a construction-differential 

subsidy has been paid shall agree that the vessel shall be 

operated exclusively in foreign trade, or on a round-the-world 

voyage, or on a round voyage from the west coast of the United 

States to a European port or ports which includes intercoastal 

ports of the United States, or a round voyage from the Atlantic 

coast of the United States to the Orient which includes intercoastal ports of the United States, or on a voyage in foreign 

trade on which the vessel may stop at the State of Hawaii, or 

an island possession or island territory of the United States, 

and that if the vessel is operated in the domestic trade on any 

of the above-enumerated services, he will pay annually to the 

Secretary of Transportation that proportion of one-twenty-fifth 

of the construction-differential subsidy paid for such vessel as 

the gross revenue derived from the domestic trade bears to the 

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stops on bona fide foreign voyages. See id. Second, the 

Secretary may consent to allow CDS-built vessels to engage 

in domestic trade for temporary periods up to six months in 

any year. See id. In each case, however, the owner of a 

CDS-built vessel using one of these exceptions must repay to 

the government a portion of the CDS depending on the time 

spent in domestic trade compared to the vessel's economic 

life, which is established by statute as twenty years for 

tankers and twenty-five years for vessels carrying dry goods. 

See id.; Pub. L. No. 86-518, §§ 1, 3, 74 Stat. 216, 216 (1960); 

H.R. REP. NO. 86-1744, at 5-8 (1960), reprinted in 1960 

U.S.C.C.A.N. 2383, 2386-87.

The meaning of section 506 cannot be understood without 

reference to Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 

U.S. 572 (1980). In Seatrain, the Court addressed the legality of an action under the 1936 Act by the Maritime Administration ("MarAd"),2

in which the agency allowed the owners of 

a CDS-built vessel to enter the domestic market upon repayment of the CDS to the government. See id. at 574. In 

__________

gross revenue derived from the entire voyages completed during the preceding year. The Secretary may consent in writing 

to the temporary transfer of such vessel to service other than 

the service covered by such agreement for periods not exceeding six months in any year, whenever the Secretary may 

determine that such transfer is necessary or appropriate to 

carry out the purposes of this chapter. Such consent shall be 

conditioned upon the agreement by the owner to pay to the 

Secretary, upon such terms and conditions as he may prescribe, 

an amount which bears the same proportion to the construction-differential subsidy paid by the Secretary as such temporary period bears to the entire economic life of the vessel. No 

operating-differential subsidy shall be paid for the operation of 

such vessel for such temporary period.

46 U.S.C. app. § 1156.

2 MarAd is an agency within the Department of Transportation 

charged with oversight of the United States merchant marine, 

including "[a]warding and administering construction-differential 

subsidy contracts and operating-differential subsidy contracts to aid 

the American merchant marine." 49 C.F.R. § 1.4(j)(1)-(2) (1997).

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upholding this action, the Supreme Court ruled that the 1936 

Act empowered the Secretary to approve full repayment/ 

permanent release transactions of this type. See id. at 588-

95. Section 506, the Supreme Court noted, only limited when 

temporary exceptions to the foreign-trade-only requirement 

would be available; neither that section nor any other addressed when permanent releases would be permissible, and 

the legislative history did not show that Congress intended to 

preclude such permanent releases.3See id. at 588. The 

discretion given to the Secretary to administer the 1936 Act, 

the Court concluded, was broad enough to allow him to 

permit the entry of the vessel into the domestic market. See 

id.

The policy upheld in Seatrain reflected MarAd's longstanding view that, under the 1936 Act, when the owner of a CDSbuilt vessel has repaid the government for the value of the 

subsidythrough monetary repayment, service in the foreign 

shipping market for the vessel's economic lifetime, or a 

combination of the twothere is no longer any need to 

restrict that vessel to service in foreign trade only. Correspondingly, MarAd has allowed CDS-built vessels to enter the 

domestic market in the middle of their economic lives upon 

repayment of a sum equal to the unamortized value of the 

CDS for the remaining portion of the ship's economic life. In 

addition, MarAd has long made known its position that the 

section 506 foreign-trade-only restriction would lapse, even 

without payment, at the end of CDS-built vessels' economic 

lives, because at that time the CDS debt to the government 

__________

3 The Court noted in particular that permanent releases into 

domestic trade do not carry the same potential for making competition unfair as temporary releases do: while a CDS-built vessel 

unrestrained in its ability to take temporary jaunts into the Jones 

Act fleet's preserve would be "capable of taking advantage of every 

shift in trade and profitability, skimming the cream and leaving 

what remains to the less mobile," the permanent release of a CDSbuilt vessel "irrevocably locates the vessel in the unsubsidized fleet 

and thus poses no danger of a supercompetitor skimming the cream 

from each market." Seatrain, 444 U.S. at 588-89.

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had been repaid in full through service in foreign trade. 

Seatrain did not invalidate these practices, nor has the agency retreated from its general interpretation of section 506 

since that time.

II.

OSG Bulk Ships, Inc. ("OSG") owns eleven non-CDS tankers carrying oil in domestic trade and leases two more. 

Many other companies built tankers with the aid of the CDS 

program between 1973 and 1984; the first of these reached 

the end of its economic lifetime on August 8, 1993, with thirty 

more scheduled to do so by the year 2004. On January 1, 

1994, with MarAd's acquiescence, the Coronado became the 

first CDS-built tanker to enter the domestic market and 

begin to compete directly with OSG's unsubsidized tankers.

In July 1993, before the economic lifetime of any CDS-built 

vessel had expired, OSG sought to have the agency reconsider 

its interpretation of section 506. Approving the permanent 

release of CDS-built vessels whose economic lives had expired, OSG argued, would be inconsistent with the plain 

language of the statute and its underlying purposes. In 

response, several other companies urged the agency not to 

alter its interpretation. The agency concluded that its interpretation of the 1936 Act was sound, and reported its decision 

to reaffirm that interpretation in a series of letters dated 

March 31, 1994, and April 1, 1994.

On January 3, 1994, three months before MarAd sent these 

letters, OSG filed suit against the agency, challenging MarAd's interpretation of section 506 under which CDS-built 

vessels could enter the domestic market after their economic 

lives had passed. Two private companies thereafter intervened as plaintiffs 4

and nine as defendants.5 The district 

__________

4 Attransco, Inc. and Matson Navigation Co., Inc. were the 

intervening plaintiffs in the district court, but these companies are 

not parties to this appeal.

5 BP Oil Shipping Co., Chestnut Shipping Co., Margate Shipping Co., and Mormac Marine Transport, Inc. were defendantintervenors below and remain parties to this appeal. Puerto Rico 

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court concluded that there was no basis on which to overturn 

MarAd's interpretation. Applying the two-step analysis of 

Chevron U.S.A. Inc. v. Natural Resources Defense Council, 

Inc., 467 U.S. 837 (1984), the court noted that under Seatrain

it was clear first that the statute did not answer the precise 

question and second that the Secretary had broad discretion 

to implement the statute; thus, MarAd clearly had discretion 

to interpret the 1936 Act with regard to permanent release of 

CDS-built vessels into the domestic market, and the interpretation it chose was a permissible one. See OSG Bulk Ships, 

Inc. v. United States, 921 F. Supp. 812, 818-27 (D.D.C. 1996). 

On cross-motions for summary judgment, the court granted 

summary judgment for the defendants. See id. at 828.

III.

While our review of the grant of summary judgment is de 

novo, see Tao v. Freeh, 27 F.3d 635, 638 (D.C. Cir. 1994), we 

affirm substantially for the reasons set forth by the district 

court in its opinion. See OSG Bulk Ships, 921 F. Supp. at 

812-28. We need only address a threshold jurisdictional 

issue and elaborate upon the response to OSG's economic 

arguments challenging the reasonableness of MarAd's interpretation.

The jurisdictional issue arises as a result of appellee's 

contention that the district court did not even have jurisdiction to hear the case in the first place.6 Appellees characterize OSG's complaint as a challenge to MarAd's decision not to 

enforce the section 506 ban on domestic trade by CDS-built 

vessels in certain instances. Heckler v. Chaney, 470 U.S. 821 

(1985), and Crowley Caribbean Transport, Inc. v. Peña, 37 

F.3d 671 (D.C. Cir. 1994), establish that agencies' nonenforce-

__________

Maritime Shipping Authority, Aquarius Marine Co., Atlas Marine 

Co., Sea-Land Service, Inc., and American President Lines, Ltd. 

were defendant-intervenors below but are no longer parties to this 

appeal.

6 Notably, only the private appellees press this argument; the 

agency itself does not.

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ment decisions are generally unreviewable under the Administrative Procedure Act ("APA"), see Chaney, 470 U.S. at 830-

35; Crowley Carribean Transp., 37 F.3d at 674-75; however, 

an agency's adoption of a general enforcement policy is 

subject to review. Indeed, in Crowley Carribean Transport,

this court distinguished between "an agency's statement of a 

general enforcement policy" and a "single-shot nonenforcement decision," the former being reviewable even 

though the latter may not be. Id. at 676; see also Edison 

Elec. Inst. v. EPA, 996 F.2d 326, 333 (D.C. Cir. 1993); 

National Wildlife Fed'n v. EPA, 980 F.2d 765, 772-73 (D.C. 

Cir. 1992). Because MarAd's action was not such a singleshot non-enforcement decision, the district court had jurisdiction to consider OSG's complaint, as we have jurisdiction to 

hear the appeal. See 28 U.S.C. §§ 1291, 1331 (1988).

Turning to the merits, we adopt the analysis of the district 

court insofar as it considered whether in section 506 Congress 

had decided the issue, in which event the agency must adhere 

to the unambiguous expression of congressional intent, and if 

not, whether the agency's interpretation of the act is reasonable in light of the statutory policies and purposes. See 

Chevron, 467 U.S. at 842-45.7Seatrain establishes that 

nothing in the 1936 Act spoke directly about whether MarAd 

could release CDS-built vessels permanently from their obligations under section 506, and no legislative enactments since 

__________

7 OSG contends that review under the arbitrary-or-capricious 

standard of section 706(2)(A) of the APA, 5 U.S.C. § 706(2)(A) 

(1988), is appropriate instead of Chevron, but this is incorrect. 

True enough, when Congress has "explicitly left a gap for the 

agency to fill, there is an express delegation of authority to the 

agency to elucidate a specific provision of the statute by regulation" 

and ensuing regulations are reviewed pursuant to the arbitrary-orcapricious standard. Chevron, 467 U.S. at 843-44. But when, as 

here, Congress has not explicitly delegated rulemaking authority to 

the agency charged with administering the statute, the Chevron

analysis is the appropriate means by which to evaluate the agency's 

interpretation of the statute. See id. at 844. In any event, applying the arbitrary-or-capricious standard would not yield a different 

result.

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Seatrain embody indications of congressional intent on the 

matter clear enough to provide an unambiguous answer.

In Seatrain, the Supreme Court upheld a policy under 

which the agency allowed a CDS-built vessel to enter the 

domestic market upon repayment of the CDS to the government. See Seatrain, 444 U.S. at 574. In so doing, the Court 

noted that "[section] 506 simply mandates that vessels enjoying the benefits of a subsidy may move in and out of 

domestic commerce only under narrowly circumscribed conditions. It speaks to temporary releases from the foreigntrade-only requirement, and only to such releases." Id. at 

588. Nothing in the 1936 Act or its legislative history, the 

Court held, had direct bearing on the Secretary's ability to 

regulate permanent releases into the domestic market. See 

id. at 590. Although the particular facts in the case involved 

CDS repayment before the end of a vessel's economic life, the 

analysis in Seatrain establishes, for purposes of the first step 

in our Chevron analysis, that at the time, Congress had not 

answered the precise question in this case: whether CDSbuilt vessels could be permanently released from the section 

506 restrictions at the end of their economic lives.

OSG's contention that congressional enactments after Seatrain show that Congress meant to answer that question in 

the negative is meritless. In 1987, in section 505 of the 

Supplemental Appropriations Act, Pub. L. No. 100-71, 101 

Stat. 391 (1987), Congress forbade MarAd from expending 

any funds "for the permanent release of vessels from the 

restrictions in section 506 of [the 1936 Act]." Supplemental 

Appropriations Act § 505.8 Contrary to OSG's contention, 

__________

8 Section 505 provides:

None of the funds appropriated or made available by this or 

any other Act or otherwise appropriated or made available to 

the Secretary of Transportation or the Maritime Administrator 

for purposes of administering the Merchant Marine Act, 1936, 

as amended (46 U.S.C. 1101 et seq.), shall be used by the 

United States Department of Transportation or the United 

States Maritime Administration to propose, promulgate, or 

implement any rule or regulation, or, with regard to vessels 

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nothing in this section precludes MarAd from interpreting the 

1936 Act to allow the permanent release of CDS-built vessels 

into the domestic market. Mere appropriations acts, which 

on their surface only address funding matters, do not make 

changes in substantive law unless they do so explicitly. See 

Tennessee Valley Auth. v. Hill, 437 U.S. 153, 190 (1978); 

National Treasury Employees Union v. Devine, 733 F.2d 

114, 117 n.8 (D.C. Cir. 1984). Neither this text nor its 

legislative history contains any expression of congressional 

intent clear enough to allow us to infer that this section had 

any substantive effect on the 1936 Act.9

Neither can OSG find support for its view that Congress 

intended to bar policies such as that adopted by MarAd in 

this case in the Maritime Security Act of 1996, Pub. L. No. 

104-239, 110 Stat. 3133. In that act, Congress amended the 

1936 Act to add a new section 512 providing that restrictions 

under section 506 do not apply to CDS-built liner vessels

after "the expiration of the 25-year period beginning on the 

date of the original delivery of the vessel from the shipyard." 

__________

which repaid subsidy pursuant to the rule promulgated by the 

Secretary May 3, 1985 and vacated by Order of the U.S. Court 

of Appeals for the D.C. Circuit January 16, 1987, conduct any 

adjudicatory or other regulatory proceeding, execute or perform any contract, or participate in any judicial action with 

respect to the repayment of construction differential subsidy 

for the permanent release of vessels from the restrictions in 

section 506 of the Merchant Marine Act, 1936, as amended: 

Provided, That such funds may be used to the extent such 

expenditure relates to a rule which conforms to statutory 

standards hereafter enacted by Congress.

Supplemental Appropriations Act § 505.

9 The legislative history behind this particular provision is quite 

sparse, but what there is implies that Congress was attempting to 

accommodate this court's decision in Independent U.S. Tanker 

Owners Committee v. Dole, 809 F.2d 848 (D.C. Cir. 1987). See H.R.

REP. NO. 100-28, at 120-21. The legislative history gives no indication that Congress meant to effect a substantive change in the 1936 

Act.

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46 U.S.C.A. app. § 1162 (Supp. 1997).10 OSG claims that the 

exclusion of CDS-built tankers from this new section was 

purposeful. Even if we were inclined to credit this textual 

argument, however, the legislative history does not support 

this characterization of section 512. Congress was if anything 

endorsing MarAd's general policy: it enacted section 512 to 

"reaffirm a longstanding executive branch interpretation of 

applicable statutes." H.R. REP. NO. 104-229, at 15 (1996), 

reprinted in 1996 U.S.C.C.A.N. 3521, 3528. This amendment 

to the 1936 Act does not show congressional intent to preclude MarAd's interpretation of section 506.

Absent congressional indication regarding whether the foreign-trade-only requirement of section 506 lapses for CDSbuilt vessels at the end of their economic lives, the only 

question is whether MarAd's interpretation of the 1936 Act in 

this regard was reasonable. See Chevron, 467 U.S. at 843-45. 

As the district court noted, in this second step, courts generally accord great deference to the particular way in which the 

agency chooses to implement a statute that it is empowered 

to administer. See OSG Bulk Ships, 921 F. Supp. at 821. 

"The court must defer to the agency's interpretation so long 

as it is reasonable, consistent with the statutory purpose, and 

not in conflict with the statute's plain language." Coal Employment Project v. Dole, 889 F.2d 1127, 1131 (D.C. Cir. 

1989); see also Rust v. Sullivan, 500 U.S. 173, 184 (1991). 

Given the Secretary's "broad authority to oversee administration of the [1936] Act," Seatrain, 444 U.S. at 585, this court 

has stated that an interpretation of the 1936 Act by MarAd 

"must be accepted 'unless it is manifestly unreasonable.' " 

__________

10 As codified, section 512 provides:

Notwithstanding any other provision of law or contract, all 

restrictions and requirements under sections 1153, 1156, and 

1212 of this Appendix applicable to a liner vessel constructed, 

reconstructed, or reconditioned with the aid of constructiondifferential subsidy shall terminate upon the expiration of the 

25-year period beginning on the date of the original delivery of 

the vessel from the shipyard.

46 U.S.C.A. app. § 1162.

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Liberty Maritime Corp. v. United States, 928 F.2d 413, 419 

(D.C. Cir. 1991) (quoting National Wildlife Fed'n v. Gorsuch,

693 F.2d 156, 174 (D.C. Cir. 1982)).

As Seatrain establishes, MarAd's interpretation does not 

conflict with the plain language of the statute. The 1936 Act 

does not directly address when the agency can grant CDSbuilt vessels permanent releases from the section's restrictions. See Seatrain, 444 U.S. at 588-90. Furthermore, the 

Supreme Court concluded, "[o]n the face of the statute, the 

Secretary's broad contracting powers and discretion to administer the [1936] Act seem to comprehend the authority" to 

allow the permanent release of CDS-built vessels upon the 

repayment of their subsidies to the government. Id. at 588. 

There is no basis in the statute upon which to conclude that 

this broad discretion would not allow MarAd to interpret the 

1936 Act to allow permanent release upon expiration of CDSbuilt vessels' economic lives as well as upon such repayment.

Hence, we need only elaborate on the district court's 

analysis by emphasizing, in response to OSG's economic 

arguments, that MarAd's interpretation accords well with the 

general purposes of the 1936 Act. In the act, Congress 

explicitly enumerated these purposes, the primary one being 

this: "It is declared to be the policy of the United States to 

foster the development and encourage the maintenance of ... 

a merchant marine." 46 U.S.C. app. § 1101 (1988); 11 see 

__________

11 Section 1101 provides:

It is necessary for the national defense and development of its 

foreign and domestic commerce that the United States shall 

have a merchant marine (a) sufficient to carry its domestic 

water-borne commerce and a substantial portion of the waterborne export and import foreign commerce of the United 

States and to provide shipping service essential for maintaining 

the flow of such domestic and foreign water-borne commerce at 

all times, (b) capable of serving as a naval and military auxiliary in time of war or national emergency, (c) owned and 

operated under the United States flag by citizens of the United 

States, insofar as may be practicable, (d) composed of the bestequipped, safest, and most suitable types of vessels, constructUSCA Case #96-5156 Document #324105 Filed: 01/16/1998 Page 12 of 17
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also Liberty Maritime Corp., 928 F.2d at 419. The MarAd 

interpretation at issue in this case furthers this goal: if CDSbuilt vessels can enter the domestic trade after the expiration 

of their economic lives, it is more likely that there will be a 

fleet of American ships "sufficient to carry [the nation's] 

domestic water-borne commerce ... and to provide shipping 

service essential for maintaining the flow of ... domestic and 

foreign water-borne commerce at all times." 46 U.S.C. app. 

§ 1101. This is particularly so given that, if CDS-built 

vessels whose economic lives have expired cannot enter the 

domestic trade, the alternative is likely the scrapyard: such 

vessels no longer receive operating-differential subsidy payments, see id. § 1175(b), and American vessels have difficulty 

competing in the international shipping market even with the 

benefit of the ODS program. As the Supreme Court concluded in Seatrain, "a permanent release from the foreign-tradeonly requirement may quite directly further the general goals 

of the [1936] Act." Seatrain, 444 U.S. at 588.

Undoubtedly, a further purpose of the 1936 Act and section 

506 in particular is "to protect unsubsidized U.S. shipowners 

from the unfair competition of subsidized U.S. shipowners," 

Liberty Maritime Corp., 928 F.2d at 413 (citing Seatrain, 444 

U.S. at 586-87), but we see no inconsistency between MarAd's 

interpretation of section 506 and this statutory end. In a 

July 1964 internal memorandum, MarAd concluded that the 

owner of a CDS-built vessel who has paid off the CDS either 

in cash or through service in foreign trade is, in effect, "in the 

same position as if he had paid the full domestic price; that 

is, he should not be required to make further repayments, 

and should not be bound to an exclusive foreign trade obli-

__________

ed in the United States and manned with a trained and efficient 

citizen personnel, and (e) supplemented by efficient facilities 

for shipbuilding and ship repair. It is declared to be the policy 

of the United States to foster the development and encourage 

the maintenance of such a merchant marine.

46 U.S.C. app. § 1101. The Jones Act contains a similar statement 

of congressional purpose. See 46 U.S.C. app. § 861 (1988).

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gation." 12 Once the economic life of a CDS-built vessel has 

expired, in MarAd's view, that vessel is no longer different in 

any relevant way from an unsubsidized vessel in the Jones 

Act fleet. Hence, MarAd has consistently avowed, there is no 

reason to "protect" that fleet from the competition from CDSbuilt vessels that have served their time in foreign trade.

This view of the competitive equities is reasonable: OSG 

has given no compelling reason why it is inherently unfair to 

admit a CDS-built vessel into the domestic market. Although 

allowing subsidized vessels to compete directly with unsubsidized vessels would be unfair if there were no offsetting 

factor to balance competitive conditions, the benefit of the 

subsidy is counterbalanced by the restriction of CDS-built 

vessels to the foreign market through their economic lives.13

By contrast, the Jones Act fleet is free at all times to exploit 

economic opportunities in both domestic and foreign markets, 

and MarAd's conclusion that the competition between Jones 

Act vessels and CDS-built vessels whose economic lives have 

expired will not be unfair is reasonable. The mere fact that 

the CDS-built vessels once had a subsidy could not be significant or the Supreme Court would not have concluded in 

Seatrain that, "at least where repayment of the CDS includes 

some amount reflecting capital costs which would have been 

incurred had no subsidy been available, such a transaction 

merely permits a once subsidized vessel to enter the domestic 

trade on a footing equal to that of vessels already in that 

trade." Seatrain, 444 U.S. at 589-90 (footnote omitted).14

We see no significant difference between repayment for the 

__________

12 Memorandum from Graydon L. Andrews, Acting General 

Counsel, Maritime Administration, to Maritime Subsidy Board, 

Maritime Administration 5 (July 28, 1964).

13 Of course, these vessels can enter the domestic market under 

the limited exceptions in section 506, but only upon proportional 

repayment of their CDS. See 46 U.S.C. app. § 1156.

14 This reasoning was presaged by Judge Bazelon's dissent in 

the decision of this court reversed by the Seatrain Court. See 

Alaska Bulk Carriers, Inc. v. Kreps, 595 F.2d 814, 843 (Bazelon, J., 

dissenting) (D.C. Cir. 1979).

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CDS in money and repayment through service in the foreign 

trade; in neither case does the vessel formerly encumbered 

with a CDS possess an unfair competitive advantage over 

vessels never so encumbered. Indeed, if anything, allowing 

CDS-built vessels to enter the domestic trade after the 

expiration of their economic lives is more fair than the 

practice upheld by the Supreme Court in Seatrain: allowing 

the permanent release of CDS-built vessels from the section 

506 restrictions before the natural expiration of their economic lives means that Jones Act vessels are less able to prepare 

for the entry of new competitors in the domestic market.

OSG contends also that the interpretation does not further 

certain other goals of the 1936 Act, such as the goals of 

ensuring that the merchant marine remain modern and, 

concomitantly, stimulating the domestic shipbuilding industry. 

See 46 U.S.C. app. §§ 1101, 1157, 1158, 1160 (1988). OSG 

claims that MarAd's interpretation conflicts with these statutory purposes in that it does not take old ships out of service 

at the end of their economic lives, but actually encourages 

them to remain active. Again, however, MarAd's interpretation of section 506 does not act counter to these goals because 

CDS-built vessels whose economic lives have expired are, for 

all relevant purposes, identical to those built without subsidization. No one would suggest that MarAd should forcibly 

retire all vessels after they reach a certain age, although 

doing so would ensure a modern fleet and stimulate domestic 

shipbuilding. The way the agency meets these goals is a 

matter to which it is entitled to some discretion. Indeed, 

given the proper level of deference we owe to MarAd, the 

agency's interpretation need not further every statutory purpose in the 1936 Act. MarAd's approach furthers the overall 

purposes of the statute, and OSG has presented no reason to 

disturb the agency's judgment about how best to weigh the 

individual purposes to effectuate Congress's overall goals. 

See Continental Air Lines, Inc. v. Department of Transp.,

843 F.2d 1444, 1450-52 (D.C. Cir. 1988).15

__________

15 In an unpersuasive alternative argument, OSG insists that 

MarAd could not adopt a general policy, but instead should have to 

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Finally, we conclude as well that MarAd's explanation of 

why its interpretation of the 1936 Act was consistent with the 

statutory purposes, though cursory, was sufficient. Cf. id. at 

1451-53. OSG insists that MarAd's pronouncements of the 

interpretation at issue in this case were cursory and circular 

and inadequately addressed the policies and purposes of the 

1936 Act. To the contrary, as the district court concluded, 

"[t]he agency has considered and explained its interpretation 

of Section 506 in a detailed and reasoned fashion consistent 

with the statutory purpose." OSG Bulk Ships, 921 F. Supp. 

at 826. MarAd has explained that the CDS-built vessel that 

has paid off its CDS either in cash or through service in 

foreign trade for its economic lifetime is, in effect, in the same 

position competitively as the non-CDS vessel that was free to 

engage in domestic trade all the while. Even though the 

agency may not have explicitly mentioned and weighed every 

statutory purpose in making this conclusion, its views with 

regard to those purposes are inherent in the explanation; for 

instance, there was no further need to address the economic 

fairness of this interpretation of section 506, given the view 

that, after the expiration of their economic lifetimes, CDSbuilt vessels would essentially be in the same competitive 

position as Jones Act vessels. On these particular facts, 

though we would certainly find a lengthier explanation helpful, we cannot say that MarAd's explanation was insufficient.

__________

weigh, upon every application of a CDS-built vessel to enter the 

domestic fleet, whether such entry would be consistent with the 

purposes and policies of the 1936 Act. This argument is evidently 

(and mistakenly) based on the declaration in Seatrain that the 

Secretary had broad discretion whether to allow the particular 

permanent release in question in that case. See Seatrain, 444 U.S. 

at 597. The Court did not, however, say that the Secretary would 

have to consider the appropriateness of each such permanent 

release on a case-by-case basis. It would be a perverse result 

indeed if the Supreme Court's deliberate affirmation of the breadth 

of the agency's discretion in such matters actually precluded the 

agency from adopting a general rule in this case. Cf. Independent 

U.S. Tanker Owners Committee, 809 F.2d at 850-51.

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Given the instruction of Seatrain and the absence of later 

congressional directive, MarAd's discretion to award permanent releases to the section 506 foreign-trade-only restriction 

is extremely broad: as long as the agency does not allow 

CDS-built vessels to take the subsidy without paying for the 

benefit with some currency of value under the 1936 Act

either money or service in the foreign shipping marketthe 

agency will likely be acting within its discretion. The interpretation of the 1936 Act at issue in this case is well within 

the realm of permissible interpretations. Accordingly, we 

affirm the grant of summary judgment.

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