Opinion ID: 362881
Heading Depth: 2
Heading Rank: 4

Heading: Policy Concerns Behind the Virgin Islands Exemption Section 21

Text: 34 There is another and stronger reason why the long line of unquestioned authority in regard to interstate and foreign commerce should not govern our interpretation of §§ 21 and 27 of the Merchant Marine Act of 1920. No one here contends that the flow of crude oil from Prudhoe Bay and then in the form of gasoline to the gas tank of the ultimate consumer anywhere in the continental United States is not domestic, interstate U.S. commerce. Such flow of commerce can be considered to take place through foreign ports, and through ports outside of the coastwise trade, even though the substances involved go through numerous transformations. This process is all in the flow of commerce, no one here contends otherwise, and Congress regulates this commerce in a myriad of ways. 35 But what we have here is a statute which regulates the coastwise trade, defines very strictly what is covered within the coastwise laws, and in so doing excludes the Virgin Islands from the coverage of the coastwise laws, all for the very specific purpose of insuring that American-flag shipping has a monopoly on the carriage of goods in the coastwise trade. However, for reasons clear to Congress at the time, and probably for additional and different reasons equally clear to Congress later, the Virgin Islands have been excluded from the application of the coastwise laws, and have continued to be so excluded for many years, for national policies quite separate from those justifying the Jones Act restriction of carriage in American-flag vessels. 55 If Congress wishes to bring the Virgin Islands into the ambit of the U.S. coastwise trade, it can do so, and in fact has already left the decision up to the President to do so if the President so desires. 56 36 The plaintiff-appellants themselves have recognized the long-standing interpretation of the Customs Service of the statute placing the Virgin Islands outside the coastwise laws; I. e., goods processed there originate for the next leg of their seaborne transportation outside the restriction of the Jones Act. In 1971 the Executive Director of appellant American Maritime Association, in connection with this statutory exemption for the Virgin Islands, advised a colleague, (T)he present situation permits foreign-flag tankers to carry crude oil from, say, Alaska, to be refined on the islands and then transshipped, again by foreign flags, to the East Coast. 57 As recently as February 1976, representatives of all three appellants here testified or submitted statements to Congress in support of a bill which would amend coastwise laws to extend them to the Virgin Islands with respect to the transportation of crude oil, residual crude oil, and refined petroleum products. 58 This was but one of at least ten unsuccessful attempts to have the exemption modified or repealed. 59 37 It is quite apparent that there are strong policy arguments, economic and political, dictating that the Virgin Islands exemption from the coastwise laws remain. Two tankers the size of the Hercules, transporting almost 220,000 tons of crude each, operating in full service the year around from Valdez to St. Croix, would only bring to the Hess refinery 5% Of its annual output. 60 All the other crude comes from sources outside the United States, is transported in either foreign-flag or U.S.-subsidized vessels to St. Croix, and is then transported in either foreign-flag or U.S.-subsidized vessels from St. Croix to the continental United States. In addition to petroleum and its products, there are large cargoes of rum and sugar which flow from the Virgin Islands to the United States in foreign bottoms. If the economics and politics of the matter call for the inclusion of the Virgin Islands in the coastwise trade of the United States, then all of this would have to be carried in American-flag ships. Obviously, there are large and conflicting economic and political interests both opposing and supporting the continuation of the Virgin Islands exemption from the coastwise laws; it all adds up to a policy choice for Congress, not any court, where the language and intent of the statute are as clear as they are in this case. 38 We appreciate the fact that appellants here do not petition this court to lift, by fiat, the Virgin Islands exemption. Rather, appellants aim were narrowly to invoke the prohibitions of the Jones Act only against foreign vessels involved in the transport of crude oil from the mainland United States to the Virgin Islands, where petroleum products refined from that same oil are transported back to the mainland. Yet we believe that to grant appellants' petition, even on the narrow facts of the Alaskan crude oil trade, would inevitably jeopardize the export from the Virgin Islands to the United States not only of petroleum products refined from mainland oil, but of All products manufactured or processed in the Virgin Islands of constituent elements brought from the United States. For we are not convinced that the facts of the Alaska crude oil trade, or of the petroleum trade generally, are so particularized as to distinguish that trade from other forms of trade carried on between the Virgin Islands and the United States. 61 39 Even more significantly, a holding favorable to appellants in this case would jeopardize innumerable foreign industries, in lands other than the Virgin Islands, that rely both on American sources of supply for raw materials and on the vast American market for re-export. For a holding in favor of appellants would seriously undermine the general proposition, on which significant sectors of world trade rely, that goods exported from the United States to undergo substantial processing or manufacture abroad before re-entering the American market are, upon their re-entry, new and different products not subject to the Jones Act prohibition. 62 40 In a world of increasingly complex and interdependent patterns of commerce, no court should rush to erect new and formidable trade barriers without clearest guidance from other, accountable branches of Government. Though appellants here seek a limited decision, we believe that the decision they seek could not logically or practically be bound to its particular facts and that its effects could bring serious harm to the foreign commerce of the United States and to other foreign shores and markets. For compelling reasons of both law and policy, we decline to set in motion such an unwarranted and unwanted train of 41 events. IV. THE NON-APPLICABILITY TO THIS CASE OF THE MAGNUSON AMENDMENT TO THE PORTS AND WATERWAYS SAFETY ACT OF 1972 42 In addition to the argument advanced by appellants American Maritime Association and Shipbuilders Council, the Seafarers Union contends that quite apart from the Jones Act, for environmental purposes, the carriage of TAPS 63 oil in the coastwise trade is confined to American vessels and . . . the carriage of that oil by foreign tankers in the coastwise trade is illegal. 64 Seafarers draws this argument from the Magnuson Amendment, 65 which was introduced to advance the date for environmental rules and regulations applicable under the Ports and Waterways Safety Act of 1972 66 to U.S.-flag vessels in the coastwise trade. This was accomplished by differentiating between foreign and U.S. vessels in the foreign trade on one hand, and U.S. vessels in the coastwise trade on the other, by inserting two clauses and adding a sentence to the existing law, thus (amendment italicized): 43 (C) Rules and regulations published pursuant to subsection (7)(A) shall be effective not earlier than January 1, 1974, With respect to foreign vessels and United States-flag vessels operating in the foreign trade, unless the Secretary shall earlier establish rules and regulations consonant with international treaty, convention, or agreement, which generally address the regulation of similar topics for the protection of the marine environment. In absence of the promulgation of such rules and regulations consonant with international treaty, convention, or agreement, the Secretary shall establish an effective date not later than January 1, 1976, With respect to foreign vessels and United States-flag vessels operating in the foreign trade, for rules and regulations previously published pursuant to this subsection (7) which he then deems appropriate. Rules and regulations published pursuant to subsection (7)(A) shall be effective not later than June 30, 1974, with respect to United States-flag vessels engaged in the coastwise trade. 67 44 From this Seafarers Union argues that there are only three types of vessels covered: foreign vessels in the U.S. foreign trade, U.S. vessels in the same trade, and U.S. vessels in the coastwise trade I. e., that there is a singular omission of U.S. vessels in the continental United States-Virgin Islands trade, which, by § 21 of the Merchant Marine Act of 1920, is Not within the coastwise trade. 45 From this the Seafarers Union further argues that the TAPS act and particularly its Magnuson Amendment, was an environmental law, not a coastwise law, and that since the Virgin Islands exemption from the Jones Act applied only to the coastwise, cabotage, laws, there was no Virgin Islands exemption in the clear Congressional mandate in the TAPS Act that, for environmental reasons, only American vessels could carry TAPS oil in the coastwise trade. 68 We agree with the Seafarers Union that the Magnuson Amendment dealt with an environmental law, not a coastwise law, but we cannot find the rationale for the rest of its argument. 46 First, it is clear, as Seafarers Union itself points out, that the environmental provisions of 46 U.S.C. § 391a apply to all vessels entering the navigable waters of the United States which have on board a cargo of oil. This includes, of course, the Virgin Islands. 69 In other words, the ship Hercules, of foreign registry, is completely subject to U.S. environmental laws while in U.S. navigable waters near Valdez, the Virgin Islands, or the continental United States. The Ports and Waterways Safety Act of 1972, as amended by the Magnuson Amendment, applies broadly and clearly to (a)ll vessels . . . which are documented under the laws of the United States Or enter the navigable waters of the United States . . . . 70 The Hercules is such a vessel, and thus is covered by the amendment and by its environmental provisions. 71 47 Second, and fundamentally, the purpose of the Magnuson Amendment had nothing whatsoever to do with restricting foreign vessels in American maritime commerce. True, there is much dialogue on the Congressional floor in regard to the carriage of the Alaskan crude by American vessels in the maritime leg of the oil transport, but in every instance brought to our attention, the maritime leg in the contemplation of the speaker was from Valdez to a West Coast continental United States port, where the Jones Act clearly would have required an American-flag vessel to be used. 72 The purpose of the Magnuson Amendment was simply to advance the effective date for rules and regulations in regard to the coastwise trade, pursuant to 46 U.S.C. § 391a(7)(A), to be effective not later than 30 June 1974. Actually, since there was a delay in the flow of Alaskan oil through the pipeline, both this advanced date and the effective date for the environmental rules and regulations pertaining to the foreign trade vessels, both U.S. and foreign, arrived before there was any oil to be carried anyway. The Magnuson Amendment thus had no practical effect. 48 Third, no negative inference can be drawn from the arguable omission of the Hercules and like vessels from the reach of the amendments. In light of the Virgin Islands exemption from United States coastwise laws, 73 a vessel transporting goods from the mainland United States to the Virgin Islands arguably is engaged in an anomalous species of foreign trade, 74 and thus falls within the class of foreign vessels . . . operating in the foreign trade to which the Magnuson Amendment specifically applies. 75 49 Finally, fundamentally, and devastatingly, there is not one word in the Magnuson Amendment or any part of the whole TAPS Act which explicitly commands that only U.S.-flag vessels be used in the transport of Alaskan crude. The Virgin Islands exception to the Jones Act is not cited and is certainly not repealed by these environmental amendments. The most that can be said, and really this is all Seafarers' brief says, is that various Congressmen Assumed that, because of the requirements of the Jones Act and because they were thinking in terms of West Coast U.S. ports, only American vessels would be involved in the transport of Alaskan crude to the United States. But this assumption was never written into law, and it is highly doubtful, given the obvious powerful economic and political forces lined up on either side of the Virgin Islands exemption from the coastwise laws question, whether it could have been. Certainly all efforts to repeal the Jones Act Virgin Islands exemption have failed, as discussed above. 76 50 In summary, if the TAPS Act and the Magnuson Amendment particularly are considered as separate statutes with a separate environmental purpose, as appellant urges and with which we agree, then there is not one word in that statute which restricts the carriage of Alaskan crude oil to American-flag vessels. To find such a restriction in the United States Code, one must resort to the Merchant Marine Act of 1920, and there one simultaneously finds the exemption of the Virgin Islands from the coastwise trade, without which the coastwise trade restriction would otherwise govern the carriage of Alaskan crude from Valdez to any U.S. territory port. The Magnuson Amendment simply has no application to this case. 51 For the reasons set forth above, the case is 52 Affirmed.