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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 February 12, 1996 Decided March 15, 1996

No. 95-5238

ARTHUR DAVID CLIFFORD, ET AL.,

APPELLANTS

v.

FEDERICO F. PEÑA, SECRETARY, UNITED STATES DEPARTMENT OF TRANSPORTATION, ET AL.,

APPELLEES

Consolidated with

95-5239, 95-5240

-

Appeals from the United States District Court

for the District of Columbia

(95cv00062)

(95cv00848)

(95cv00849)

Ernest A. Cohen argued the cause for appellants. With him on the briefs were Richard S. Zuckerman,

Leslie H. Wiesenfelder, and J. Patrick Morris. Edward M. Gleason, Jr. entered an appearance.

Steve Frank, Attorney, U.S. Department ofJustice, argued the cause for the federal appellees. With

him on the brief were Frank W. Hunger, Assistant Attorney General, Douglas N. Letter, Litigation

Counsel, and Eric H. Holder, Jr., United States Attorney.

Robert T. Basseches argued the cause for appellee American President Lines, Ltd. With him on the

brief were John T. Rich and I. Michael Greenberger.

Before: SENTELLE, RANDOLPH, and ROGERS, Circuit Judges.

Opinion for the court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge: Three labor unions challenged the decision of the United States

Maritime Administration permitting American President Lines, Ltd., to operate six new foreign-built

vessels under foreign flag in its existing international shipping operations. The district court

consolidated the actions and, on summary judgment, ruled in favor of the Maritime Administration

and the company. In this appeal the unions dispute the Administration's authority to grant the

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"waiver" under § 804(b) of the Merchant Marine Act of 1936, 46 U.S.C. app. § 1222(b), and claim

that in doing so, the Administration violated the Administrative Procedure Act, failed to give an

adequate explanation of its decision and improperly supplemented the administrative record. The

government not only opposes these contentions, but also challenges the unions' standing to sue and

claims that in any event a court may not review the Administration's decision to grant a § 804(b)

waiver.

I

Within a few years, ships built in America and manned by American crews are expected to

disappear from international commerce. For most of this century, foreign shipyards have been

charging considerablylessthanAmerican shipyards; and the wages and benefits paid to foreign crews

have been significantly lower than those paid to American crews. The federal government had been

making up the difference through grant and loan programs. The Merchant Marine Act of 1936, 46

U.S.C. app. §§ 1101-1295g, provided domestic shipowners with a construction-differential

subsidya CDSin order to stimulate shipbuilding in American shipyards, and an

operating-differential subsidyan ODSto offset the higher costs of using American crews. See

Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 573-76 (1980). ODS contracts between

ship operators and the Maritime Administration have terms of up to 20 years, and are generally

limited to ships not more than 25 years old. 46 U.S.C. app. § 1175. In return for the subsidies, the

operator must register the vessel under the U.S. flag; man the ship with an American crew; and not

own or operate "any foreign-flag vessel which competes with any American-flag service determined

... to be essential" (46 U.S.C. app. § 1222(a)).

In 1981, President Reagan eliminated all funding for CDS and placed a moratorium on the

awarding of new ODS contracts, policies continued to this day. As a result, no liners to be used in

foreign commerce are currently being constructed in American shipyards; many ODS-subsidized

ships now in operation are nearing the end of their useful lives; and ODS commitments making it

economically feasible to man vessels with American crews are set to terminatethe last liner ODS

contract will expire in 1998, the last bulk carrier ODS contract in 2001. The net effect is that if

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obsolete American-flag vessels are to be replaced at all, theywill be replaced by foreign-built vessels,

which are ineligible for ODS subsidies.

In1993, AmericanPresident Lines"APL"was operating 19American-flag containerships

on essential-service trade routes between Pacific coast ports in this country and Asia under an ODS

contract due to expire on December 31, 1997. Before the expiration date, at least four of the

company'ssubsidized vessels will have reached 25 years of age, the maximum ODS subsidy age. To

remain competitive in the international shipping market, APL had to replace these vessels, which it

described as too small and too expensive to operate. And so in July 1993, APL filed an application

with the Maritime Administration requesting permission to operate six new foreign-flag vesselsthen

under construction in foreign shipyards.

Acting pursuant to § 804(b) and finding "special circumstances" and "good cause," the

Administration granted APL's application in 1994, on condition that, among other things, the

company make the vessels available in case of a national emergency; that it not use any ODS

payment for the benefit of any foreign interest; that it not scrap or reflag any of its existing

American-flag vessels untilOctober 1, 1995, and thereafter onlywiththeAdministration's permission;

and that APL shall offer its new ships for inclusion in a new maritime support program if Congress

enacts one.

Shortly before oral argument, APL informed us of some further developments. After the

district court's decision upholding the grant of the waiver, the Administration approved APL's sale

of six of its American-flag vessels to Matson Navigation Company, Inc. (an American-flag carrier

engaged in the domestic trades) and reduced APL'sminimumsailing requirementsfor its Pacific trade

routes. APL had planned to replace five of its existing vessels with the new foreign-built ships the

Administration authorized it to operate. Three of the ships sold to Matson were, according to APL,

among the five destined for replacement. Of the remaining two, one did not belong to APL and will

be returned to its owner when the charter expires on July 1, 1996. APL represents that it intends to

operate the other vessel with an American crew through 1996 and possibly through 1997.

II

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A

The government raisestwo preliminary issues. The first, dealing with the unions' standing to

challenge the Maritime Administration's decision, is put to rest by Autolog Corp. v. Regan, 731 F.2d

25, 31 (D.C. Cir. 1984). In ruling that a maritime union had standing to seek an injunction against

a foreign carrier in order to prevent it from servicing a route reserved for American-flag vessels, we

held in Autolog that the potential loss of American jobs was a sufficient injury to conferstanding, that

the injurywastraceable to foreign carrier's expansion, and that an injunction would redressthe injury.

The unionsface the same sort ofinjury here. Overturning the Administration's decision is a necessary

step in forestalling APL's replacement of its vessel with a foreign ship manned by foreign workers.

To be sure, the unions would not wind up with much redress: APL's operating differential subsidy

contract expires on December 31, 1997, unless Congress intervenes. But the limited nature of the

relief does not destroy the unions' standing to seek it.

The second preliminary question is whether, as the government contends, Administration

orders granting § 804(b) waivers are unreviewable because they are "committed to agency discretion

by law" (5 U.S.C. § 701(a)(2)), and hence there is "no law to apply." Citizens to Preserve Overton

Park, Inc. v. Volpe, 401 U.S. 402, 410 (1971). The words of the statute appear unrestricted and

undefined"Underspecial circumstances and for good cause shown, theSecretaryofTransportation

may, in his discretion, waive the provisions of subsection (a) ... as to any contractor, for a specific

period of time" (46 U.S.C. app. § 1222(b))but over the years the Maritime Administration has

supplied a list of factors to guide its § 804(b) judgment. See, e.g., Certain Bulk Operators, 25

Shipping Reg. (P & F) 1261, 1264 (Mar. Admin. 1990). The agency's policies have thus provided

standards rendering what might arguably be unreviewable agency action reviewable. See Padula v.

Webster, 822 F.2d 97, 100 (D.C. Cir. 1987). Our judgment in this regard is not inconsistent with

Crowley Caribbean Transport, Inc. v. Peña, 37 F.3d 671 (D.C. Cir. 1994). We there declined to

review the Maritime Administration's determination that a § 804(b) waiver was unnecessary because

this either was an advisory agency opinion, in which event no concrete injury existed, or it was an

agency decision not to prosecute, in which event Heckler v. Chaney, 470 U.S. 821, 832 (1985),

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precluded judicial review.

B

This brings us to the unions' claim that granting the waiver to APL was arbitrary and

capricious. The Administration views § 804(b) as authorizing it to exercise discretion consistent with

the policies of the Act, weighing the "benefits to be gained by allowing the [use of foreign-flag

vessels] ... against the detriment to the competingU.S.-flag services whichwould result therefrom...."

Waterman Steamship Corp., 16 Shipping Reg. (P & F) 1243, 1253 (Mar. Admin. 1976). The unions

do not take issue with this general statement. Their complaint is that allowing APL to replace

American-flag vessels with foreign-flag vessels is contrary to the Act's policy, set forth in 46 U.S.C.

app. § 1101, of promoting a merchant marine "owned and operated under the United States flag by

citizens of the United Statesinsofar as may be practicable, ... and manned with a trained and efficient

citizen personnel...."

While the objective the union identifiesis plainly one of the Act's objectives, it is far from the

only one. The district court found the Act's goals "multiple and competing." Seafarers Int'l Union

v. United States, 891 F. Supp. 641, 646 (D.D.C. 1995). This is undoubtedly an accurate depiction

even if one confined attention to the declaration of policy in § 1101. The declaration specifies several

goals:

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 water-borne

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 ofserving 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

best-equipped, safest, and most suitable types of vessels, constructed in the United

States and mannedwith a trained and efficient citizen personnel, and (e)supplemented

by efficient facilities for shipbuilding and ship repair.

It is apparent that the Maritime Administration might not be able to achieve everything in this list at

any given moment. How much it can achieve has to depend on economic conditions. See

Independent U.S. Tanker Owners Comm. v. Dole, 809 F.2d 847, 854 n.4 (D.C. Cir.), cert. denied,

484 U.S. 819 (1987); Independent U.S. Tanker Owners Comm. v. Skinner, 884 F.2d 587, 594 (D.C.

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Cir. 1989), cert. denied, 495 U.S. 904 (1990).

A § 804(b) waiver relieves an operator of the restrictions imposed under § 804(a), the

provision barring the operation of foreign-flag vessels competing with American-flag vessels in

essentialservices. We must assume that § 804(a) implements at least some of the objectives set forth

in § 1101. And yet we must also assume that requiring strict adherence to § 804(a) could turn out

to be counterproductive. Otherwise Congress would have had no reason to enact § 804(b). It

therefore does no good for the union to complain that the waiver granted to APL will not accomplish

everything the Act set out to achieve, or that permitting APL to operate foreign-flag ships will

contradict some of § 1101's objectives. Any waiver of a statutory restriction will, by definition, allow

something otherwise forbidden.

In order to grant APL's request, the Maritime Administration had to find "special

circumstances" and "good cause." The agency did not, indeed could not, close its eyes to the

impending demise of the subsidy programs, which by anyone's account represented a "special

circumstance," certainly one not contemplated by the 1936 Congress. This development forced APL

to look elsewhere for new ships. Enabling APL to remain a viable competitor was "good cause."

The Administration believed, and the record supports its view, that a waiver would accomplish that

end. The conditions the Administration placed on the waiver ensured that APL's new ships would

be in American hands, available for use in a national emergency and, possibly, available for inclusion

in a new programpermitting reflagging. The Administration acted consistently with its prior § 804(b)

decisions, applying the agency's long-standing criteria. The district court thoroughly reviewed this

aspect of the agency's reasoning and we see no need to repeat that discussion. See 841 F. Supp. at

646. None of the Administration's previous waiver decisions, which the unions describe as designed

to expand American-flag operations, were made during the sort of economic crisis now facing an

industry on the brink of collapse. With the entire subsidy program about to end and the continued

existence of any American-flag service in doubt, the Maritime Administration did what it could to

minimize the impact on American labor and to retain some American control over international

shipping. The Administration acted consistently with the policies set forth in § 1101. APL's new

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ships remain available for service in times of emergencies (§ 1101(b)), they are owned by an

American company (§ 1101(c)), the company's viability is enhanced (§ 1101(c)), and American

citizens will continue crewing the other vessels in APL's fleet (§ 1101(d)).

The unions have several other contentions about the adequacy of the administrative record,

and the Administration's failure to explain why it did not impose different conditions on APL. The

district court correctly determined that these arguments were not made before the agency and

therefore would not be considered on judicial review (891 F. Supp. at 649-50). See, e.g., Natural

Resources Defense Council, Inc. v. EPA, 25 F.3d 1063, 1073 (D.C. Cir. 1994). The unions' separate

argument that the district court improperly permitted the agency to supplement the record with a

declaration made by Edmond J. Fitzgerald, the Director of Maritime Administration's Office of

Subsidy and Insurance, also fails. Fitzgerald offered his declaration to provide the court with

background information about the subsidy program and the current state of the American shipping

industry, informationunderlying theMaritimeAdministration's decisionandwellknownto the agency

and to the parties. We agree with the district court that there is nothing improper in receiving

declarations that " "merely illuminate[ ] reasons obscured but implicit in the administrative record.'

" 891 F. Supp. at 647 (quoting Appeal of Bolden, 848 F.2d 201, 207 (D.C. Cir. 1988)); see also

Camp v. Pitts, 411 U.S. 138, 141-43 (1973).

Affirmed.

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