APL's ODS agreement contemplated trade between Vancouver and Dutch Harbor when it authorized "overseas" carriage. In the more than twenty-five years that APL has operated on trade route 29, it has never carried any cargo between Dutch Harbor and Vancouver. Indeed, various filings by APL in the administrative record indicate that APL itself was aware that its contract and the statute might, under some interpretations, bar such carriage.
Under such circumstances, it was not unreasonable for plaintiffs here to fail to challenge Dutch Harbor-Vancouver service in the earlier hearings. They were faced with a long history in which APL had chosen to carry no cargo between Dutch Harbor and Vancouver, and with a contract that limited APL to overseas carriage. They could reasonably expect that such contract language, combined with the past practice of APL, indicated that Vancouver-Dutch Harbor carriage, with transshipment to the USPNW, was "coastwise" carriage rather "overseas" carriage, and hence would not take place. Now they are suddenly confronted with the Secretary's novel interpretation of the term "overseas" in the ODS agreement, an interpretation which authorized the service they reasonably believed was barred. A due regard to the purposes and policy of the Merchant Marine Act of 1936 requires that they be given an opportunity to show that existing Dutch Harbor-Vancouver service by United States registry vessels is adequate.
Such a holding is also consistent with the statutory requirement of a hearing when service "in addition to the existing service" is proposed. At the outset, it is notable that "the presumption stands in favor of a hearing rather than the other way around," and that "for a hearing to pass muster in this court, it must be impeccably dressed with fairness." Sea-Land Service, Inc. v. Connor, supra, 418 F.2d at 1146 & 1149. It cannot seriously be claimed that there has already been a hearing "impeccably dressed with fairness" on APL's proposed Dutch Harbor-Vancouver carriage. At most, there was a hearing on APL's entire trade route 29 service in 1967, at which time it may reasonably have appeared that some Dutch Harbor-Vancouver service was barred. And since that time, the quality and degree of service by unsubsidized vessels of United States registry may well have changed substantially, especially since there has been no subsidized service by APL or anyone else in the interim.
Under such circumstances, the Court concludes that the first subsidized Dutch Harbor-Vancouver service in more than twenty-five years would be "new" and would be "in addition to existing service." Cf. Sea-Land Service, Inc. v. Connor, supra, 418 F.2d at 1148. A hearing in accordance with the first clause of section 605(c), followed by the appropriate findings contemplated by that clause, would accordingly be a prerequisite to APL's subsidized Dutch Harbor-Vancouver service. As no such hearing, "impeccably dressed with fairness," has taken place, the Secretary's January 31, 1983, Order, as amended on May 31, 1983, cannot stand. On this separate and distinct ground, as on the grounds discussed in Part II of this memorandum, the motions to alter and/or amend the judgment are denied in the accompanying order.
Upon consideration of the motions of federal defendant and defendant-intervenor American President Lines, Ltd. to alter or amend this Court's judgment of June 29, 1983, the oppositions of plaintiffs, and the replies of federal defendant and defendant-intervenor, and for reasons more fully explained in an accompanying memorandum, it is this 26th day of June, 1984, hereby
ORDERED: that the motions to alter or amend should be, and hereby are, DENIED.
This matter is before the Court on the cross-motions for summary judgment filed by defendants and by plaintiffs, who are a number of unsubsidized sea carriers who serve ports in Alaska. Plaintiffs object to a decision by the Secretary of Transportation on January 31, 1983, as clarified on May 31, 1983, that American President Lines, Ltd. (APL) may carry domestic cargo between Dutch Harbor, Alaska and Vancouver, British Columbia.1a APL has intervened and has also filed for summary judgment. On June 16, 1983, the Court held a hearing on the various motions for summary judgment. For reasons more fully stated here, the accompanying Order will grant the plaintiffs' motions and deny the motions filed by the Secretary and APL.
The Merchant Marine Act of 1920, generally known as the Jones Act, 46 U.S.C. § 883, and the Merchant Marine Act of 1936, 46 U.S.C. §§ 1156 and 1175(a), specifically restrict the voyages of U.S. flag vessels whose construction and operation are subsidized by the United States. Section 506 of the 1936 Act requires the owner of a subsidized vessel to "agree that the vessel shall be operated exclusively in foreign trade, or on a round the world voyage." 46 U.S.C. § 1156. Section 605(a) of that same Act provides that
no operating-differential subsidy shall be paid for the operation of any vessel on a voyage on which it engages in coastwise or intercoastal trade.
46 U.S.C. § 1175(a). Both of these provisions exempt from their prohibitions stops at intercoastal ports on round-the-world voyages, voyages from the United States west coast to Europe, and voyages from the United States east coast to the Orient. In addition, subsidized vessels on voyages in foreign trade may stop "at the State of Hawaii, or an island possession or island territory of the United States." Stops at Alaska are conspicuously omitted from these exemptions.
The Secretary of Transportation has implemented these and other statutory provisions in an Operating-Differential Subsidy Agreement (MA/MSB-417), which subsidizes APL to permit it to compete effectively in foreign trade. The agreement specifically restricts APL's service at ports in Alaska and British Columbia to "overseas carriage."
On March 9, 1979, and again on April 14, 1982, APL asked the agency to interpret the Agreement so as to permit the carriage of cargo between Dutch Harbor and Vancouver. The Maritime Subsidy Board (MSB) denied that request, but on January 31, 1983, Secretary Lewis reversed that decision. Secretary Lewis's decision was reaffirmed, with modifications, by Secretary Dole on May 31, 1983.
In deciding to permit APL to carry domestic cargo between Dutch Harbor and Vancouver, the Secretary addressed both the contract and the statutes. The contract phrase "only for overseas carriage" was found to have been "originally intended to preclude short-run 'coasting' from the United States Pacific Northwest and Alaska to British Columbia." Opinion and Order Granting Reconsideration in Part and Denying Reconsideration in Part at 5 (May 31, 1983) (hereinafter "Reconsideration Order). By contrast:
The long and often difficult carriage over the 1,724 nautical miles between the foreign port of Vancouver and the isolated Aleutian Island port of Dutch Harbor, located on the western extremity of the Gulf of Alaska, constitutes overseas transportation.