Opinion ID: 459826
Heading Depth: 2
Heading Rank: 4

Heading: Validity of the Condition

Text: 29 Finally, we must address the validity of the condition MarAd imposed on the approvals. Although ARCO and Maryland Tanker do not contest MarAd's authority under the statute to issue conditional approvals, they do assert that this particular condition is arbitrary, capricious, and an abuse of discretion. In advancing this argument, appellants point to a portion of MarAd's order that seemingly attacks the very condition it adopts: 30 The effect of a conditional waiver is detrimental to the shipping industry by making MARAD the ultimate charter broker. MARAD's insistence on the employment of all suitable Jones Act vessels during the entire waiver period creates an artificial charter rate structure for such vessels and effectively permits the owners and operators of such ships to block the utilization of more efficient tonnage in the domestic trade. The Government's intrusion into the charter market fails to promote either efficiency or economy. Moreover, the uncertainty caused by a waiver system dependent upon future charters of Jones Act vessels will bar the entry of VLCC tonnage on a temporary basis. Activation of such vessels from lay-up cannot be economically undertaken without the realistic anticipation of a full six months of employment. 42 31 Upon closer examination of the order, however, it is evident that this paragraph was not a finding by MarAd, but, rather, a reproduced verbatim view of Acturus Shipping Inc., another applicant for approval to enter the domestic trade. 43 32 We conclude that the condition imposed by MarAd was a reasoned effort to fulfill the dual purposes of the Act: to protect the unsubsidized domestic fleet from displacement by the subsidized fleet, while still ensuring adequate domestic shipping capacity. The Supreme Court recently explained the purpose of the bar to easy entry by CDS vessels in the domestic trade: 33 It was recognized from the outset that substantial limits would have to be placed upon the entry of subsidized vessels into the domestic trade. Any other result would have been disastrous for the unsubsidized Jones Act fleet for which that trade was (and is) reserved. Burdened by higher construction costs, greater outstanding debt, and higher operating expenses that fleet would simply have been unable to compete with new vessels enjoying the benefits of the 1936 Act. 44 34 The Court noted that absent substantial barriers to the ability of a subsidized vessel to move from one market to the other, it would be a formidable force in both, capable of taking advantage of every shift in trade and profitability, skimming the cream and leaving what remains to the less mobile. 45 The Court concluded, therefore, that Congress intended entry by subsidized vessels only under narrowly circumscribed conditions. 46 It was appropriate, therefore, for MarAd to insist on the continued employment of all available unsubsidized vessels before granting any approvals to enter the domestic trade. Only by such an insistence could MarAd ensure that the unsubsidized fleet was protected from unfair competition with the subsidized fleet. Although this could have been accomplished by an approval for a period of less than six months, it was reasonable for MarAd to adopt a conditional approval as a method of sparing all parties the prospect of an unnecessary renewal of the approval process. Once the license terminated, if ARCO or Maryland Tanker believed that the domestic shipping trade still had room for their vessels, they could have applied for new approvals to enter the trade. If all unsubsidized vessels were employed, and unmet domestic demand still existed, approvals likely would have been forthcoming. 47