Opinion ID: 454658
Heading Depth: 1
Heading Rank: 2

Heading: the board's refusal to reconsider its adequacy finding

Text: 31 Section 605(c) of the Act prohibits ODS ships from participating in shipping trades already served by U.S.-flag vessels unless the Secretary determines that the service provided by vessels of the United States registry is inadequate and that in the accomplishment of the purposes and policy of [the Act] additional vessels should be operated thereon. 46 U.S.C. Sec. 1175(c). As a general matter, existing U.S.-flag service is considered adequate under this provision if domestic vessels can carry 50 percent or more of all dry bulk preference cargoes. See Sea-Land Service, Inc. v. Kreps, 566 F.2d 763, 767 (D.C.Cir.1977); Atlas Marine, 18 Ship.Reg.Rep. at 997. Section 605(c) is clearly designed to prevent overtonnage in a particular trade and thus to protect existing U.S.-flag carriers from the undue competitive harm that would result from excess capacity. See Aeron, 695 F.2d at 574. 32 In its petition to reopen the Board's 1978 adequacy determination, the AMA pointed to a 1981 MarAd staff study which concluded that the addition of Aeron's seven ships to the preference cargo trade would severely over-tonnage the trade. See Staff Review of Subsidized Vessel Participation in the Cargo Preference Trades 10-16 (1981) (summarized at 46 Fed.Reg. 29,300 (May 31, 1981)). The AMA and Phoenix also argued that intervening changes in the shipping industry had rendered existing U.S.-flag service in the preference trade adequate. See Final Order, 22 Ship.Reg.Rep. at 604. The Board apparently took two positions on the motion for reconsideration. In its Tentative Order on remand, the Board reasoned that the unsubsidized shippers' new evidence did not warrant a reconsideration of the 1978 adequacy finding. In particular, the Board concluded that the staff study was based on faulty premises, that the extra-record evidence cited by the AMA was not suitable for agency notice, and that the record must close at some point. See Tentative Order, 22 Ship.Reg.Rep. at 322-23. This initial assessment was arguably within the Board's discretion. See, e.g., Bowman Transp., Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 294-96, 95 S.Ct. 438, 446-47, 42 L.Ed.2d 447 (1974) (agency refusal to reopen record only reversible for abuse of discretion); Eastern Carolinas Broadcasting Co. v. FCC, 762 F.2d 95, 103 (D.C.Cir.1985) (same) 33 In its Final Order, however, the Board clearly repudiated this position and concluded instead that our decision in Aeron stripped it of any discretion to reconsider the 1978 finding with respect to Aeron's application for entrance into the preference trade. 34 The chief problem with intervenors' contentions is that the courts' remand allowed the Board no discretion in admitting the [Aeron] vessels into the subsidized preference trades. It is not possible to reopen the Board's 605(c) finding that the relevant preference trades are and will be inadequately served by U.S.-flag vessels without allowing the possibility that if there is adequate service, some or all of the [Aeron] vessels could not be permitted in the subsidized preference trades. The courts unequivocally ordered the Board to admit the [Aeron] vessels into the preference trades.... 35 The Board does not reach whether trade conditions have materially changed since the 1978 decision. The Board simply does not have the authority to refuse to comply with the district court order to admit the [Aeron] vessels into the preference trades. 36 Final Order, 22 Ship.Reg.Rep. at 604 (emphasis added) (footnote omitted). 37 We agree with the district court that our Aeron opinion should not be read to bar the Board from considering whether the 1978 adequacy proceedings should be reopened. In Aeron, we concluded that the Board could not rationally admit only two of Aeron's ships once it had determined that existing U.S.-flag service was inadequate within the meaning of section 605(c) and that the admission of all seven Aeron ships would not result in undue competitive harm to existing U.S.-flag vessels. See Aeron, 695 F.2d at 575. We held only that 38 [i]t was arbitrary and capricious for the Maritime Subsidy Board, after finding inadequate service in the bulk preference trades, to nonetheless admit only two of the seven Aeron ships.... The decision of the district court is affirmed on admitting all Aeron ships. 39 Id. at 582 (emphasis added). 19 Our conclusion that the Board must admit all seven Aeron ships to the preference trade was thus solely premised on the Board's failure to relate rationally its adequacy findings to its admission decision. See id. at 575. We did not review the adequacy finding itself, cf. id. at 572 n. 16, and nothing in our opinion suggested that the Board was not free, to whatever extent agencies normally are, to reconsider that factual determination in light of changed circumstances. 20 40 In its original section 605(c) opinion in this case, moreover, the Board explicitly reserved the option of revising its adequacy determination to reflect possible changes in the tonnage needs of the bulk preference trade. The 605(c) findings on these applications, the Board noted, survive until they become 'stale,' i.e., are overcome by changes in the market or subsequent events. Obviously, that length of time cannot be predicted. Aeron, 19 Ship.Reg.Rep. at 496 (footnotes omitted). The Board thus clearly left open the possibility of further adequacy proceedings in light of, say, massive economic changes, and neither this court nor the district court questioned that ruling in Aeron. Cf. Aeron, 525 F.Supp. at 545 n. 37 (explicitly recognizing that the Board might abandon its section 605(c) opinion in light of Aeron's experience in the preference trade). Unquestionably, then, our Aeron opinion did not deprive the Board of discretion to reopen the 1978 adequacy proceeding if circumstances so warranted. See generally 46 C.F.R. Sec. 201.173 (1984) (establishing procedures for reopening Board proceedings in light of changed circumstances.) 41 Aeron also contends that, regardless of our Aeron mandate, the Board cannot reopen the 1978 proceeding because the Act contemplates a single, final inadequacy finding and because Aeron has justifiably relied on the Board's 1978 determination. 21 The district court did not rule on either argument and instead directed the Board to consider these issues on remand before it determines whether intervening charges in the bulk shipping industry warrant reopening the record. The Board is currently doing so. 22 While Aeron's arguments are not insubstantial, we agree with the district court that the agency should be given an opportunity to develop facts concerning Aeron's reliance on the 1978 decision and to express a view as to whether Congress intended section 605(c) findings to be final. The Board's consideration of those issues will, of course, be subject to judicial review at the appropriate time. 42 We therefore affirm both the district court's ruling that our opinion in Aeron does not prevent the Board from reopening the adequacy findings and its order directing the Board to consider whether it should do so in light of Aeron's reliance on the 1978 decision, the purposes of section 605(c), and the alleged changed circumstances.