The opinion of the court was delivered by: GREEN
Plaintiffs and plaintiff-intervenors come to this Court seeking relief against certain governmental agency heads and to have the Court declare the Cargo Preference Act (or the "Act"), as amended, 46 U.S.C. § 1241(b), applicable to the Blended Credit Program (or the "Program") as administered by the United States Department of Agriculture.
They further seek to have this Court declare that the defendants' failure or refusal to enforce the Cargo Preference Act to the Blended Credit Program is unlawful and beyond the scope of their legal authority and, therefore, is arbitrary, capricious, and an abuse of discretion.
The plaintiffs and plaintiff-intervenors also request this Court to permanently enjoin defendants from refusing to comply with and enforce the terms of the Cargo Preference Act.
Plaintiff Transportation Institute ("TI"), and plaintiff-intervenor Joint Maritime Congress ("JMC"), are private, non-profit entities dedicated to research and education on maritime issues and to activities promoting the United States-flag ("U.S.-flag") fleet. Motion for Summary Judgment in Favor of Plaintiff Transportation Institute ("TI's Motion for Summary Judgment"), Affidavit of Peter J. Luciano at para. 2 ("Luciano Affidavit"); Plaintiff-Intervenors' Motion for Summary Judgment, Affidavit of David Leff at para. 2 ("Leff Affidavit").
TI and JMC members operate U.S.-flag vessels engaged in the U.S. foreign and domestic shipping trades. Luciano Affidavit at para. 2; Leff Affidavit at para. 2. TI and JMC members have carried, currently carry, and are available in the future to carry cargoes shipped on U.S.-flag vessels pursuant to United States Government export programs subject to the Cargo Preference Act. Luciano Affidavit at para. 2; Leff Affidavit at para. 2. Many TI and JMC members have carried preference cargoes of agricultural commodities on the same shipping routes on which commodities have been shipped under the Blended Credit Program administered by the United States Department of Agriculture. Luciano Affidavit at para. 2; Leff Affidavit at para. 2.
Plaintiffs Seafarers International Union of North America, Atlantic, Gulf, Lakes and Inland Waters District, AFL-CIO ("SIU") and the Marine Engineers Beneficial Association, AFL-CIO ("MEBA") are national labor unions who represent, for collective bargaining purposes, unlicensed seamen, and licensed engineers, respectively, who work on U.S.-flag vessels engaged in the U.S. foreign shipping trades. Plaintiff Seafarers International Union of North America, Atlantic, Gulf, Lakes and Inland Waters District, AFL-CIO Motion for Summary Judgment ("SIU Motion for Summary Judgment"), Affidavit of Angus Campbell para. 3 ("Campbell Affidavit"); Plaintiff-Intervenors' Motion for Summary Judgment; Affidavit of Mario C. White at para. 2 ("White Affidavit"). Many of these seamen and engineers have worked, currently work, and are available in the future for work on U.S.-flag vessels that carry preference cargoes, including cargoes of agricultural commodities. Campbell Affidavit at para. 8; White Affidavit at para. 3. Some of those vessels have carried agricultural cargoes on the same shipping routes on which such commodities have been shipped under the Blended Credit Program. Campbell Affidavit at para. 8; Leff Affidavit at para. 2.
Defendant Elizabeth H. Dole is Secretary of the United States Department of Transportation ("DOT"), having been duly appointed to that position by the President. Defendant H. E. Shear is Administrator of the Maritime Administration ("MARAD"), having been duly appointed to that position by the President. Pursuant to Title 46, Section 1603 of the United States Code, the Maritime Administrator "shall report directly to the Secretary of Transportation and shall perform such duties as the Secretary of Transportation shall prescribe." Defendant John R. Block is Secretary of the United States Department of Agriculture ("USDA"), having been duly appointed by the President. These officials are being sued in their official capacity as officials of the United States Government.
Agricultural Program at Issue
The Commodity Credit Corporation ("CCC") is a corporation organized and existing under the laws of the United States. The CCC is a federal agency, within the USDA, and established by Congress pursuant to the Commodity Credit Corporation Charter Act. 15 U.S.C. §§ 714 et seq. It was created "for the purpose of stabilizing, supporting, and protecting farm income and prices, of assisting in the maintenance of balanced and adequate supplies of agricultural commodities . . ., and of facilitating the orderly distribution of agricultural commodities. . . ." Id. The CCC is "subject to the general supervision and direction of the Secretary of Agriculture." Id.
Pursuant to 15 U.S.C. § 714c, the CCC administers certain programs in which it undertakes to finance export sales of agricultural commodities and to make certain guarantees in connection with export sales of agricultural commodities. Id.
Two programs that are at issue in this action, the CCC Export Sales Program ("GSM-5") and the CCC Export Credit Guarantee Program ("GSM-102"), are administered by the CCC.
Under the GSM-5 program, the CCC will enter into a financing agreement with a United States exporter of agricultural commodities by which the CCC purchases for cash, after delivery, the exporters account receivable arising from the export sale. 7 C.F.R. § 1488.1(b) (1983). Under this program, the CCC will allow the foreign importer up to three years to repay the account receivable at a specified rate of interest. See 7 C.F.R. §§ 1488.1(a), 1488.14. The account receivable purchased by the CCC must be backed by a letter of credit in a form acceptable to the CCC and which is issued in favor of the CCC by a United States or foreign bank. 7 C.F.R. § 1488.12. Under the terms of GSM-5, an exporter is virtually protected against all risks of nonpayment except for nonpayments resulting from his breach of contract, certification, or warranty, or nonpayment of any amounts not covered by the bank obligation owing to the CCC.
The USDA has stated that:
The program is designed to stimulate the export of U.S. commodities in adequate supply to make possible commercial sales which might not be made by the U.S. in the absence of program financing. The program is particularly helpful in opening new markets, preserving or increasing the U.S. share of existing markets, preventing the decline in the U.S. share or loss of a U.S. market; and in assisting developing countries with commercial potential in their transition from purchases under concessional and aid-type programs to commercial purchases. The program eases the transition for the country from long-term concessional buying to eventual cash purchases.
Exhibits in Support of Motions of Plaintiffs and Plaintiff-Intervenors for Summary Judgment ("Plaintiffs' Exhibits"), Exhibit 18 at 2.
Under the GSM-102 program, a United States exporter obtains from the foreign importer a guarantee of payment of the selling price of the agricultural commodities, in the form of a bank letter of credit. 7 C.F.R. § 1493.1. The CCC guarantees the United States exporter or the exporter's assignee against losses resulting from any failure of the foreign bank or its correspondent bank to honor drafts drawn upon it or otherwise to remit amounts properly due the exporter or his assignee. 7 C.F.R. §§ 1493.4, 1493.9, 1493.10. The CCC will guarantee payments under this program for a period of up to three years. 7 C.F.R. §§ 1493.1(a), 1493.2(1), 1493.4, 1493.9, 1493.10.
The stated purpose of the GSM-102 program is to "transfer the risk of loss due to defaults in payment by foreign banks from the exporters and their financing institutions to CCC. . . ." 7 C.F.R. § 1493.1. The program is also "intended to: facilitate exportation; forestall or limit declines in exports; permit exporters to meet competition from other countries; and increase commercial exports of U.S. agricultural commodities." Id.
The GSM regulations provide that the provisions of the Cargo Preference Act are not applicable to shipments under this program. 5 C.F.R. § 1493.1(c).
On October 20, 1982, Secretary of Agriculture John Block announced the creation of a three-year, $1.5 billion Blended Credit Program to be administered by the CCC. See Plaintiffs' Exhibit 1. The Blended Credit Program combines interest-free government credit under the GSM-5 program with government-guaranteed private credit under the GSM-102 program.
The Program utilizes funds in accordance with Section 135 of the Omnibus Budget Reconciliation Act of 1982 (Pub. L. No. 97-253), 96 Stat. 763, 772 (1982). In that section the Secretary of Agriculture is required to expend funds for export credit financing under existing programs of the CCC.
The Blended Credit Program as formulated for fiscal year 1983 utilized 80 percent GSM-102 guarantees and 20 percent GSM-5 credits to provide an interest rate approximately 2 percent below prevailing U.S. market values. For fiscal year 1984 the blend was altered and varied slightly by country, with the average blend approximately 85 percent GSM-102 and 15 percent GSM-5.
As stated by USDA, the purpose of the Program is to expand U.S. agricultural exports to help relieve price pressures caused by surplus supplies. Plaintiffs' Exhibit 1. The Blended Credit Program was intended to provide new export credits principally to developing countries.
From the announcement of the Program through January 5, 1984, blended credit sales were made to the following fifteen countries: Bangladesh, Brazil, Chile, Egypt, Iraq, Jamaica, Korea, Morocco, Pakistan, the Philippines, Portugal, Thailand, Tunisia, Yemen, and Yugoslavia. TI's Motion for Summary Judgment, Affidavit of Kathryn P. Broderick at para. 5.
Foreign governments were invited by the Secretary of Agriculture to apply for financing under this Program by submitting proposals directly to the USDA or by directing such proposals to USDA through the United States embassies overseas and the foreign embassies located in Washington, D.C. See Plaintiffs' Exhibit 22. Officials from USDA have traveled to foreign countries to encourage and assist foreign governments to apply for the Program.
In deciding whether to approve countries for blended credits, USDA expressly considered the economic needs of the prospective importing country. See Plaintiffs' Exhibit 25.
Without the Blended Credit Program in effect, the sales that occurred through the Program would not have been possible. See Plaintiffs' Exhibit 24.
Plaintiffs and plaintiff-intervenors contend that, when implementing the Blended Credit Program, USDA must apply the Cargo Preference Act. The Cargo Preference Act provides, in pertinent part:
(1) Whenever the United States shall procure, contract for, or otherwise obtain for its own account, or shall furnish to or for the account of any foreign nation without provision for reimbursement, any equipment, materials, or commodities, within or without the United States, or shall advance funds or credits or guarantee the convertibility of foreign currencies in connection with the furnishing of such equipment, materials, or commodities, the appropriate agency or agencies shall take such steps as may be necessary and practicable to assure that at least 50 per centum of the gross tonnage of such equipment, materials, or commodities (computed separately for dry bulk carriers, dry cargo liners, and tankers), which may be transported on ocean vessels shall be transported on privately owned United States-flag commercial vessels, to the extent such vessels are available at fair and reasonable rates for United States-flag commercial vessels, in such manner as will insure a fair and reasonable participation of United States-flag commercial vessels in such cargoes by geographic areas. . . .
(2) Every department or agency having responsibility under this subsection shall administer its programs with respect to this subsection under regulations issued by the Secretary of Transportation.
46 U.S.C. § 1241(b) (1983).
Up through July 27, 1983, DOT and MARAD took the position that the Cargo Preference Act applied to the Blended Credit Program. This position was stated in at least twelve separate documents ranging in time from January 13, 1983, through July 27, 1983. See Plaintiffs' Exhibits 2-13.
Since the announcement of the Blended Credit Program on October 20, 1982, Secretary Block and the CCC have taken the position that the Cargo Preference Act does not apply.
On July 27, 1983, Maritime Administrator Shear reversed MARAD's prior position and declared that "DOT will not seek to apply cargo preference requirements to [U.S.D.A's] Blended Credit Program as presently formulated." Plaintiffs' Exhibit 8 at 1. In coming to this conclusion, defendant Shear stated that:
In our view [the cargo preference] laws apply to export credit programs such as those administered by [USDA's] Commodity Credit Corporation. Nevertheless, it is apparent that the application of U.S. flag carriage requirements to the present blended credit program would result in costs that would entirely offset the program's benefits, thereby defeating the underlying purpose of both the blended credit program and the cargo preference laws.
This Court has jurisdiction over this matter pursuant to sections 1331, 1337, and 1361 of Title 28, United States Code. Declaratory relief is authorized by sections 2201 and 2202 of Title 28, United States Code. Venue is also proper pursuant to section 1391(e) of Title 28, United States Code.
Because there are no genuine issues of material fact and the only issues to be resolved are those of questions of law, summary judgment is appropriate in this action. See Fed. R. Civ. P. 56(c).
Article III Standing Considerations
Defendants assert that plaintiffs and plaintiff-intervenors do not have sufficient Article III standing to contest defendants' allegedly illegal activity. The Supreme Court in Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 70 L. Ed. 2d 700, 102 S. Ct. 752 (1982), recently set forth the standard by which a court determines whether a plaintiff has constitutional standing to bring an action. The test provided:
At an irreducible minimum, Art. III requires the party who invokes the court's authority to "show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant . . ., and that the injury "fairly can be traced to the challenged action" and "is likely to be redressed by a favorable decision. . . ."
Id. at 472 (citations omitted). This standard may be simply described as the "injury-in-fact" test.
In addressing the first prong of the constitutional standing criteria as outlined in Valley Forge, the Court notes that both the plaintiffs and plaintiff-intervenors have sustained real economic injury. The failure of defendants to enforce the Cargo Preference Act to the Blended Credit Program has caused TI members to miss the opportunity to carry such cargoes; has prevented SIU members from working aboard vessels that might carry such cargoes; has prevented the JMC from collecting contributions that would have been received had its members carried such cargo; has caused the MEBA to lose dues it would have collected from its members who, instead of being idle, would have had the opportunity to work on ships that carried such cargoes; and has prevented Aeron, Aquarius, Marine and Transbulk from attaining employment possibilities for their ships had they had the opportunity to carry such cargoes.
Plaintiffs and plaintiff-intervenors claim injury based on lost income and lost employment opportunity because of defendants' failure to apply the Cargo Preference Act to the Blended Credit Program. If, for example, 50 percent of the cargo shipped under the Blended Credit Program were reserved for U.S.-flag vessels as directed by the Act, plaintiffs and intervenor-plaintiffs contend that they would have benefited from that increased use of U.S.-flag ships.
These claims do satisfy the actual or threatened injury requirement as outlined in Valley Forge. The loss of business, employment opportunities, and money is more than the "identifiable trifle" that plaintiffs and plaintiff-intervenors need, to meet the "actual or threatened injury" prong of the constitutional standing requirement. Cf. Autolog Corp. v. Regan, 235 U.S. App. D.C. 178, 731 F.2d 25, 31 (D.C. Cir. 1984), citing Public Citizen v. Lockheed Aircraft Corp., 184 U.S. App. D.C. 133, 565 F.2d 708, 714 (D.C. Cir. 1977); United States v. SCRAP, 412 U.S. 669, 689 n.14, 93 S. Ct. 2405, 37 L. Ed. 2d 254 (1973).
In addressing the second prong of the "injury-in-fact" test, as outlined in the Valley Forge case, the Court must determine whether the injury alleged by plaintiffs and plaintiff-intervenors can be fairly traced to the allegedly illegal activity of defendants. Certainly, there can be no argument that the alleged loss of business, employment opportunity, and money is fairly traceable to defendants' failure to enforce the Cargo Preference Act. Had the Act been enforced to the Blended Credit Program, plaintiffs and plaintiff-intervenors would have enjoyed some benefit from the Program. No showing, other than the injuries claimed "fairly can be traced" to the unlawful acts, is required to satisfy the second prong of the "injury-in-fact" test. Valley Forge Christian College v. Americans United for ...