Opinion ID: 362881
Heading Depth: 1
Heading Rank: 3

Heading: applicability of the merchant marine act of 1920

Text: 20 Section 27 speaks of merchandise being transported. 32 The inquiry thus becomes what merchandise is transported from Valdez to St. Croix and what merchandise is transported from St. Croix to the continental United States? It is clear that the merchandise on the first leg is Alaskan crude oil. If the facts of this case ended with the arrival of the Alaskan crude at the Hess refinery in St. Croix, Virgin Islands, the case would be very simple, because § 21 plainly states, (T)he coastwise laws of the United States shall not extend to the Virgin Islands; 33 hence § 27, perhaps the most important of the coastwise laws, would not restrict the transport to American vessels. 21 But the facts do not end at the Hess refinery, for it is there that the Alaskan crude is refined into eleven products, which are then largely transported to the continental United States. 34 Appellants contend that the two voyages must be considered as one and that the petroleum, whether in crude or refined form, must be thought of as one product, I. e., one type of merchandise within the statute. It is only on this theory that the Jones Act (§ 27) can apply to this case, I. e., if the merchandise transported from Valdez to St. Croix is the same merchandise subsequently transported to the continental United States, and if the two legs of the voyage thus must be treated as one. 22 We cannot agree with this concept, because crude oil is simply quite different from the ultimate products which come out of a refinery. Judge Gasch found that: 23 Alaskan oil that is refined at the Hess refinery will yield the following products in the following amounts: 24 Product % Volume ------- -------- benzene .47 toluene 2.23 xylene 0.27 paraxylene 1.08 regular gasoline 4.19 premium gasoline 4.19 unleaded gasoline 3.00 jet fuel 8.70 No. 2 Oil 14.50 No. 6 Oil 55.82 sulfer pellets 0.30 -------- 94.75 total marketable product recovery 5.25 fuel gas equivalent 25 Benzene, toluene, xylene and paraxylene are petrochemicals used in the manufacture of finished chemical products. Jet fuel is used as fuel for jet aircraft, and gasoline as fuel for motor vehicles. Sulphur is used in the manufacture of fertilizers and pharmaceuticals. No. 2 oil is used as home heating oil No. 6 oil is used as fuel by power plants. Each of these products is different in name, physical and chemical character, and use from each other and from crude oil. Moreover, crude oil cannot be used for any of these purposes. 35 (Emphasis added.) 26 We agree with the trial court's conclusion that all the credible evidence of record conclusively demonstrates that the products of the Hess refinery are new and different merchandise from the Alaskan crude oil. 36 It thus seems clear that the merchandise, the language of the statute, transported between Valdez and St. Croix is one thing, crude oil, while the merchandise transported from St. Croix to the continental United States is a collection of quite different other things, I. e., products which are physically, chemically, and usefully different from the original crude oil. 37 Assuming that the exception of § 21, (t)he coastwise laws of the United States shall not extend to the Virgin Islands, applies in full vigor, then each voyage, carrying different merchandise, is between a point within the coastwise laws of the United States and a point outside the coastwise laws of the United States. We hold that the requirement of the Jones Act that the cargo be carried in American vessels does not apply to either voyage; each is outside the coastwise trade of the United States. 38 27 Further, under the circumstances of this case, we hold that it is not the Intent of a shipper to send goods to a final destination that governs, but the degree to which the goods are altered In fact in the course of commercial dealings. 39 Thus we must reject appellants' contention that because Hess may have intended that most of the crude oil shipped from Valdez return in some form to the mainland United States in fact, that it was bound by law not to sell it abroad 40 the prohibitions of the Jones Act apply. 41 The enforcement provision cited by appellants which applies the penalty of forfeiture where there is intent to evade foreign vessel prohibitions 42 does not define under what circumstances evasion takes place. Such definition is provided in the substantive provisions of the Jones Act itself, which speaks not of Intent but of actual transport of merchandise. Since appellants have not contended in this case that in the absence of an actual violation of the Jones Act the forfeiture provisions should apply, and since no evidence has been adduced of any intent by Hess to evade the Act absent such actual violation, the issue of intent does not govern this case. 28
29 Two other points should be noticed in regard to our interpretation of § 27. The words either directly or via a foreign port 43 were inserted in the original statute 44 by the Congress in 1893, 45 after the decision in United States v. 250 Kegs of Nails. 46 In that case the Government sought forfeiture of 250 kegs of nails which had been transported in a Belgian vessel from New York to Antwerp, there unloaded and reloaded upon a British vessel, which then transported the same nails (I. e., the same merchandise) to California. The statute then in effect did not contain the phrase either directly or via a foreign port. Both the District Court and the Ninth Circuit found the statute inapplicable to the transportation of the nails, because (i)n the plain and ordinary meaning of the words, 'to transport goods from one domestic port to another' means to carry goods In one continuous voyage . . . . It does not mean to carry them in two distinct and separate voyages, or in two distinct vessels. . . . 47 Congress, seeing how easily the protection to American shipping would be vitiated by a simple transshipment of the same cargo, inserted the words either directly or via a foreign port to prohibit such simple transshipment. 30 The legislative history of the via a foreign port amendment shows the limited purpose of Congress, only to extend coverage to the type activity involved in 250 Kegs of Nails ; the debates did not even refer to merchandise that was to any degree processed in a foreign country. 48 No language in the statute indicates that the landing of the cargo in a foreign port for the legitimate purpose of manufacture or processing of the goods would not convert the goods to other merchandise or would not interrupt the continuity of the voyage. 49 The words either directly or via a foreign port have reference only to the Keg of Nails situation, I. e., the simple transshipment of the same goods in a foreign port, which under the amended statute does not break the continuity of the voyage. What we have here in the operations of the St. Croix refinery is a far different undertaking from simple transshipment of the same merchandise.
31 The last point to be made in regard to § 27 is the implication derived from the penalty of Forfeiture for a violation of carrying cargo by non-U.S. vessels in the coastwise trade. It is well understood that statutes imposing a forfeiture, particularly the horrendous penalty of forfeiture of an entire cargo worth millions of dollars, are to be construed strictly. 50 The rationale for such strict construction that persons should receive clear and unequivocal warning before facing exposure to harsh penalties 51 is especially applicable here, where the penalty for noncompliance is enormous. 52 The application of this principle is not undercut by the argument, strenuously urged by the appellants, as to the applicability of numerous judicial precedents involving the flow of interstate and foreign commerce. It is also well understood that such statutes of a regulatory nature are to be construed broadly, and appellants urge that this applies to the Jones Act in this case. 53 32 We do not agree; the Jones Act is an Act for a very specific purpose, with sharply defined contours, and the forfeiture provision is a strict penalty for a violation of such a limited and sharply defined statute. In its effect the Jones Act, though pertaining to commerce, thus bears a closer resemblance to other penal statutes than it does to statutes generally regulating commerce. Decisions construing regulatory statutes broadly, from their very nature and purpose, are of doubtful applicability. 54 33
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.