that President Lines was merely performing its contractual duty to replace obsolete vessels according to the schedule incorporated into its ODS contract.
Plaintiff challenged the Subsidy Board's determination that no hearing or findings were required before ODS for the NOL vessels could be awarded to APL by filing an application for reconsideration with the Board. Although it found the application to be untimely, the Board nevertheless considered it and rejected it as meritless. Thereupon, plaintiff petitioned the Secretary for review, which was denied. This suit followed.
President Lines has challenged plaintiff's standing to assert a claim under Section 605(c), while defendants have argued that plaintiff cannot challenge the Board's findings under Section 601. Because the Court rules adversely to plaintiff on the merits, it need not examine the issues of standing and reviewability further.
A. Replacement of Vessels Under President Lines' ODS Contract
The contract under which APL received ODS requires that vessels in its subsidized fleet be periodically replaced according to a specified schedule. Initially, the contract authorized APL to operate a subsidized fleet of 23 vessels; that number was increased to 24 in 1982 after a full Section 605(c) hearing. In 1979, APL withdrew three vessels from its fleet, the S.S. Presidents Lincoln, Tyler and Grant. Those ships were to be replaced by three "C-9" container vessels. In order to fund construction of the C-9 vessels at a time when construction differential subsidy monies were not available, APL availed itself of Section 510 of the Act, 46 U.S.C. § 1160. That section provides that an operator may trade in its obsolete vessels to the government, in return for a credit to be applied against the cost of constructing new vessels. Accordingly, APL turned in three "C-6" vessels to the Military Sealift Command. The two NOL vessels were acquired, then, as replacements for two of the three C-6 vessels. The third C-6 was not replaced, leaving APL with a subsidized fleet of 23 vessels.
Plaintiff vigorously insists that APL in fact added two ships to its fleet when it acquired the NOL vessels. That contention, which goes beyond a mere misreading of the record, is completely meritless. While it is true that, for a time, APL was operating only 21 vessels, it is beyond cavil that APL was authorized to operate 23 or 24 vessels. And although it is true that the Board may review an operator's ODS grant "in light of conditions as they . . . exist" at the time that the operator takes advantage of that grant, Matson Orient Lines, Inc., 5 F.M.B. 410, 418 (1958), the possible exercise of such discretion does not -- contrary to plaintiff's assertions -- amount to a "use it or lose it" rule. The Subsidy Board quite properly exercised its discretion in declining to review the 23 ship authorization,
finding instead that it was perfectly acceptable for APL to acquire the NOL vessels to replace ships previously withdrawn from its fleet. See Admin. Rec. at 179-84.
A review of the record, then, reveals that the two NOL vessels did not add to its subsidized fleet. Plaintiff still maintains, however, that there is no "replacement" exception to the hearing requirement of Section 605(c) and that, because those vessels added to APL's total capacity, the requirements of Sections 605(c) and 601 could not be circumvented.
B. Need for a Section 605(c) Hearing
In interpreting and developing its own guidelines and precedents, an agency such as the Subsidy Board will be given wide latitude by a reviewing court. See American Maritime Ass'n v. United States, 247 U.S. App. D.C. 55, 766 F.2d 545, 560 (D.C. Cir. 1985) (citing Udall v. Tallman, 380 U.S. 1, 16, 13 L. Ed. 2d 616, 85 S. Ct. 792 (1965)). The Board has consistently declined to hold Section 605(c) hearings whenever an operator replaces one of its vessels. Delta Steamship Lines, Inc., 21 SRR
961 (MSB 1982); Waterman Steamship Corp., 13 SRR 472, 476 n.2 (MSB 1972). Such a construction of the Act is a perfectly reasonable one and, consequently, will not be second-guessed upon judicial review. See Sea-Land Service, Inc. v. Dole, 232 U.S. App. D.C. 449, 723 F.2d 975, 979 (D.C. Cir. 1983). As the Board has noted,
if Section 605(c) were to be interpreted as requiring that a subsidized operator would have to go through a new hearing every time it replaced its vessels, litigation before the Board would be continuous and interminable. Such a state of affairs would seriously impede new building programs by the subsidized operators and tend to render the operating subsidy program unworkable.
Waterman, 13 SRR at 480 (attach. A).
Moreover, vessel replacement does not require additional hearings even when the replacements add to the total capacity of the operator's fleet. Delta, 21 SRR at 967. It is understood that replacement vessels will -- and ought to -- add to the productivity of an operator's fleet. Id. Such replacement is normally taken into account at the time that the initial ODS contract is negotiated. Id. at 965-68. The intervenor's case certainly presents no exception. As long as the acquisition of new vessels is "consistent with the notion of 'replacement,'" id. at 967, no new Section 605(c) is required. What amount of additional capacity would disqualify vessel acquisition as "replacement" is not clear. However, it certainly cannot be said that the Board abused its discretion in finding that an 18 percent increase in the net capacity of APL's fleet, Admin. Rec. at 177, was "consistent with the notion of replacement," when precisely that percentage increase in capacity was approved by the Board on a prior occasion. Delta, 21 SRR at 966 n.12.
In sum, there appears to be no reason in law or fact why the Board should have held a Section 605(c) hearing in connection with President Lines' acquisition of the two NOL vessels.
C. Adequacy of Section 601 Findings
When a subsidized operator replaces one or more of its vessels, no Section 601(a)(4) finding of necessity for a subsidy is required "in the absence of any contractual changes." Delta, 21 SRR at 968. Nevertheless, the Board did make appropriate findings of fact concerning the need for a subsidy to operate the NOL vessels. It noted, among other things, that APL was competing with a fleet of recently built and technologically advanced foreign vessels. Admin. Rec. at 178. Even if the Board overestimated the stiffness of the foreign competition faced by APL, it is not for a reviewing court to substitute its judgment for that of a fact-finder better versed in the relevant subject matter. Such is particularly the case given that the Board has conducted extensive and continuous review of the operations of President Lines. See Admin. Rec. at 183-84. Moreover, while a reviewing court may entertain a challenge to the Board's adherence to the procedures prescribed by the Act, the substance of the Board's decisions are essentially nonreviewable. American President Lines v. Federal Maritime Board, 112 F. Supp. 346, 348 (D.D.C. 1953); Moore-McCormack Lines, Inc. v. United States, 188 Ct. Cl. 644, 413 F.2d 568, 580-82 (1969).
Plaintiff's challenge to the Board's findings under Section 601 is unsupported.
Plaintiff Sea-Land has presented to the Court no reason in law or fact to overturn the decision of the Subsidy Board to extend President Lines' ODS coverage to include the two NOL vessels. The record demonstrates that these ships were indeed replacement vessels. With that in mind, the Board properly exercised its discretion in declining to hold a Section 605(c) hearing on APL's application for ODS for those vessels. Similarly, with the full record of APL's subsidized operations before it, the Board made findings pursuant to Section 601 sufficient to satisfy the procedural requirements of the Act.
Accordingly, for the reasons stated above, and because there are no material issues of fact in dispute, the Court grants the motions of defendants and the intervenor American President Lines for summary judgment.
An appropriate Order will be entered.
[EDITOR'S NOTE: PAGINATION IN THE HARD COPY SOURCE ENDS AT THIS POINT.]
It is this 31st day of March, 1986,
That the motions for summary judgment of defendants and intervenor American President Lines, Ltd. are granted;
That plaintiff's motion for summary judgment is denied; and
That the above-captioned matter is dismissed with prejudice.