B-58323, OCTOBER 10, 1956, 36 COMP. GEN. 291

B-58323, OCTOBER 10, 1956, 36 COMP. GEN. 291

MARITIME - SUBSIDIES - OPERATING-DIFFERENTIAL - EXTENDED VOYAGES OR CRUISES EXTENDED VOYAGES OR CRUISES BY AMERICAN STEAMSHIP COMPANIES BEYOND THEIR REGULAR PORTS OF CALL THAT TAKE APPROXIMATELY THE SAME TIME AS REGULAR VOYAGES ARE NOT DEVIATIONS WITHIN THE GENERAL TRADE AREA OF REGULAR SERVICES BUT ARE CONSIDERED "NEW SERVICES" AND THE STEAMSHIP COMPANIES ARE NOT ENTITLED TO AN OPERATING-DIFFERENTIAL SUBSIDY PURSUANT TO 46 U.S.C. 1011 UNTIL AFTER ADMINISTRATIVE DETERMINATIONS ARE MADE THAT THE "NEW SERVICES" MEET THE STATUTORY REQUIREMENTS FOR OPERATING-DIFFERENTIAL SUBSIDIES. A DETERMINATION BY THE FEDERAL MARITIME ADMINISTRATOR THAT A MINIMUM OF ONE EXTENDED VOYAGE PER YEAR BY AN AMERICAN STEAMSHIP COMPANY ON ESTABLISHED TRADE ROUTES MEETS THE REGULAR SERVICE REQUIREMENTS OF SECTION 211, MERCHANT MARINE ACT, 1936, WILL SUPPORT THE PAYMENT OF SUBSIDIES FOR PAST EXTENDED VOYAGES AND CRUISES OR THE AMENDMENT OF THE CONTRACT TO PROVIDE SUBSIDY ON FUTURE EXTENDED VOYAGES.

TO THE CHAIRMAN, FEDERAL MARITIME BOARD, OCTOBER 10, 1956:

REFERENCE IS MADE TO A LETTER DATED MAY 3, 1956, AND ENCLOSURES, FROM THE VICE CHAIRMAN, FEDERAL MARITIME BOARD, REQUESTING OUR VIEW AS TO WHETHER THE MERCHANT MARINE ACT, 1936, AS AMENDED, AUTHORIZES THE FEDERAL MARITIME BOARD TO PAY OPERATING-DIFFERENTIAL SUBSIDIES ON THE OPERATION BY THE AMERICAN EXPORT LINES, INC., OF THE S.S. INDEPENDENCE AND S.S. CONSTITUTION ON CERTAIN CRUISES, OR VOYAGES EXTENDED BEYOND THEIR REGULAR PORTS OF CALL IN THE WESTERN MEDITERRANEAN (AS NOW PROVIDED IN ITS OPERATING-1DIFFERENTIAL SUBSIDY AGREEMENT, CONTRACT NO. FMB-1), TO PORTS IN THE EASTERN MEDITERRANEAN ON TRADE ROUTE 10 AND TO SOUTHWEST ASIA ON TRADE ROUTE 18.

SECTION 101 OF THE MERCHANT MARINE ACT, 1936, 46 U.S.C. 1011, DECLARES, IN PERTINENT PART, THAT THE POLICY OF THE UNITED STATES IS TO FOSTER THE DEVELOPMENT AND ENCOURAGE THE MAINTENANCE OF A MERCHANT MARINE SUFFICIENT TO PROVIDE SHIPPING SERVICE "ON ALL ROUTES ESSENTIAL FOR MAINTAINING THE FLOW" OF FOREIGN COMMERCE.

AS STATED BY THE THEN GENERAL COUNSEL OF YOUR OFFICE IN HIS OPINION OF JULY 29, 1954, RELATIVE TO THE COMPANY'S REQUEST FOR AMENDMENT OF ITS SUBSIDY AGREEMENT, THE ENTIRE HISTORY OF OPERATING SUBSIDY LEGISLATION BEFORE AND AFTER THE 1936 ACT PRESUPPOSES ESTABLISHMENT AND MAINTENANCE OF A SERVICE WITH REGULAR FREQUENCIES. SPECIFICALLY, SECTION 211 OF THE ACT (46 U.S.C. 1121 (A) AND (B) ( DIRECTS, IN PERTINENT PART, THAT THE COMMISSION (THE MARITIME ADMINISTRATOR UNDER REORGANIZATION PLAN NO. 21 OF 1950), 64 STAT. 1273 DETERMINE (1) THE SERVICES, ROUTES AND LINES WHICH ARE DEEMED ,TO BE ESSENTIAL FOR THE PROMOTION, DEVELOPMENT, EXPANSION, AND MAINTENANCE OF THE FOREIGN OMMERCE" AND (2) THE REQUIREMENTS OF VESSELS "WHICH SHOULD BE EMPOYED IN SUCH SERVICES OR ON SUCH ROUTES OR LINES, AND THE FREQUENCY AND REGULARITY OF THE SAILINGS OF SUCH VESSELS, WITH A VIEW TO FURNISHING ADEQUATE, REGULAR, CERTAIN AND PERMANENT SERVICE.' DETERMINING THE ESSENTIALITY OF SUCH SERVICES, ROUTES, AND LINES, THE ADMINISTRATOR IS REQUIRED TO CONSIDER AND WEIGH THE ECONOMIC FEASIBILITY OF OPERATING "SUCH STEAMSHIP LINES" AGAINST THE BENEFITS THE "MAINTENANCE OF ANY SUCH LINE MAY AFFORD TO THE FOREIGN COMMERCE OF THE UNITED STATES AND TO THE NATIONAL DEFENSE.'

HAVING PROVIDED FOR THE ESTABLISHMENT OF ESSENTIAL TRADE ROUTES AND THE REQUIRED FREQUENCIES OF SAILINGS THEREON, TITLE VI OF THE ACT AUTHORIZES THE FURNISHMENT OF OPERATING-DIFFERENTIAL SUBSIDY TO APPLICANTS FOR THE OPERATION OF A VESSEL OR VESSELS IN THE "ESSENTIAL SERVICES" DETERMINED UNDER SECTION 211, PROVIDED CERTAIN ADDITIONAL DETERMINATIONS ARE MADE BY THE COMMISSION (THE FEDERAL MARITIME BOARD UNDER REORGANIZATION PLAN NO. 21 OF 1950). INSOFAR AS PERTINENT HERE, SECTION 601 (A), 46 U.S.C. 1171, REQUIRES, AS A PREREQUISITE TO THE GRANTING OF SUCH AID BY THE BOARD, THAT IT DETERMINE THAT THE SUBSIDY IS REQUIRED TO MEET FOREIGN FLAG COMPETITION AND TO CARRY OUT EFFECTIVELY THE PURPOSES AND POLICY OF THE ACT. SHOULD BE NOTED, HOWEVER, THAT THE AUTHORITY OF THE BOARD TO PROVIDE BY CONTRACT (OR AMENDMENT THERETO) FOR THE PAYMENT OF SUBSIDY IS LIMITED AND CIRCUMSCRIBED BY THE ROUTE PATTERNS AND FREQUENCY OF SAILINGS ESTABLISHED BY THE ADMINISTRATOR UNDER SECTION 211.

ACCORDINGLY, SECTION 601 RELATES TO THE AWARDING OF A CONTRACT BY THE BOARD FOR OPERATING SUBSIDY ONLY TO THE EXTENT THAT IT PROVIDES SERVICES (ROUTES AND SAILINGS) CONSONANT WITH THE ADMINISTRATOR'S DETERMINATION UNDER SECTION 211. IN THIS CONNECTION, THE BOARD'S CONTRACT WITH AMERICAN EXPORT RECITES THAT " THE MARITIME ADMINISTRATOR HAS DETERMINED THAT THE (SERVICES AND SAILINGS THEREAFTER DESCRIBED ARE) * * * ESSENTIAL FOR THE PROMOTION, DEVELOPMENT, EXPANSION AND MAINTENANCE OF THE FOREIGN COMMERCE OF THE UNITED STATES.' THE "SERVICE" OF THE INDEPENDENCE AND CONSTITUTION IS DESCRIBED AS A PASSENGER SERVICE BETWEEN " NEW YORK, NAPLES, GENOA AND CANNES, WITH THE PRIVILEGE OF CALLING AT THE AZORES AND GIBRALTAR.' MINIMUM OF 24 AND MAXIMUM OF 30 SAILINGS PER ANNUM IN THAT SERVICE IS PRESCRIBED. IT IS NOTED THAT " TRADE ROUTE 10," PARENTHETICALLY NOTED IN THE DESCRIPTION OF THE SERVICE, EXTENDS TO THE EASTERN MEDITERRANEAN BUT THE ADMINISTRATOR'S DETERMINATIONS RELATIVE TO THE PASSENGER SERVICE, PORTS OF CALL AND THE REQUIRED SAILINGS OF THE INDEPENDENCE AND CONSTITUTION DO NOT ENCOMPASS THE EASTERN MEDITERRANEAN PORTS CONTAINED IN THAT ROUTE. CONSEQUENTLY, WHILE THE SUBJECT EXTENDED VOYAGES WERE STILL ON TRADE ROUTE 10, IT IS NOT SUGGESTED THAT THEY CONSTITUTE MINOR DEVIATIONS IN THE GENERAL TRADING AREA OF THE REGULAR SERVICE OF THE CONSTITUTION AND INDEPENDENCE, TO WHICH THE ADMINISTRATOR'S DETERMINATIONS UNDER SECTION 211 WERE APPLICABLE. THUS, THE EXTENDED VOYAGES CONSTITUTE, IN EFFECT, A "NEW SERVICE" REQUIRING ALL THE PREREQUISITE DETERMINATIONS INCIDENT THERETO BEFORE OPERATING DIFFERENTIAL SUBSIDY MAY BE PAID THEREFOR.

THE COMPANY ARGUES THAT "IT IS AN ESTABLISHED PRACTICE UNDER THE ACT TO PERMIT OPERATORS A GOOD DEAL OF LEEWAY" IN CONNECTION WITH THE PORTS OF CALL ON THE ROUTE AND CITES THE DESCRIPTIONS OF SUBSIDIZED SERVICES ON NUMEROUS TRADE ROUTES. HOWEVER, THE PRIVILEGED PORTS OF CALL AUTHORIZED IN THE CITED SERVICES ARE LOCATED WITHIN THE GENERAL TRADE AREAS OF THE PARTICULAR SERVICE, MOSTLY EN ROUTE BETWEEN THE TERMINI THEREOF. THAT THERE IS SOME LATITUDE TO AUTHORIZE DEVIATIONS IN THE GENERAL TRADE AREAS WHICH ARE NOT SIGNIFICANT ENOUGH IN TIME OR DISTANCE TO WARRANT ALTERING THE SUBSIDY STATUS OF THE VESSEL IS UNQUESTIONED. HOWEVER, CALLS AT PRIVILEGE PORTS OR MINOR DEVIATIONS CLEARLY ARE NOT REASONABLY ANALOGOUS TO AN EXTENSION OF A VOYAGE BEYOND THE REGULAR PORTS OF CALL WHERE, AS HERE, THE TURNAROUND TIME ON THE EXTENDED PORTION IS APPROXIMATELY THE SAME AS IS ONE COMPLETE TRIP OVER THE REGULAR ROUTE. MOREOVER, THE FACT THAT IF SUBSIDY IS PAID THE OPERATING RESULTS OF THE PAST EXTENDED VOYAGES WILL HAVE BEEN PROFITABLE, IF SUBSIDY IS ALLOWED, IS ONLY ONE FACTOR FOR CONSIDERATION BY THE ADMINISTRATOR IN DECIDING WHETHER THE ROUTE TRAVERSED AND THE SAILINGS PROVIDED WARRANT HIS DETERMINATIONS UNDER SECTION 211 WHICH ARE PREREQUISITE TO AN EFFECTIVE AWARD BY THE BOARD OF OPERATING SUBSIDY FOR THE ADDITIONAL SERVICE. THE FACT THAT THIS SERVICE WILL BE PERFORMED ON TRADE ROUTES ON WHICH THE COMPANY NOW PERFORMS OTHER SERVICES DOES NOT REMOVE THE NECESSITY FOR COMPLIANCE WITH THE REQUIREMENTS OF THE ACT REGARDING DETERMINATIONS OF THE NEW SERVICE.

THE COMPANY ALSO URGES THAT NO FINDINGS UNDER SECTIONS 211 OR 601 ARE REQUIRED TO AUTHORIZE THE PAYMENT OF SUBSIDY AND CITES ARTICLE I-2 (E) OF THE CONTRACT--- AND ITS SOURCE, SECTION 606 (3), 46 U.S.C. 1176- - IN SUPPORT THEREOF. THE ACT CONTEMPLATES LONG-TERM CONTRACTS AS ONE MEANS OF MAINTAINING "ADEQUATE, REGULAR, CERTAIN, AND PERMANENT SERVICE" ESSENTIAL TO THE FOREIGN COMMERCE. UNDER THE LAW AS ORIGINALLY ENACTED, THE FORMER MARITIME COMMISSION WAS RESPONSIBLE FOR ALL OF THE PREREQUISITE DETERMINATIONS AS WELL AS THE AWARDING, AMENDING AND TERMINATING OF OPERATING-DIFFERENTIAL SUBSIDY CONTRACTS. HOWEVER, REORGANIZATION PLAN NO. 21, WHILE PLACING THE LATTER FUNCTION UNDER THE JURISDICTION OF THE FEDERAL MARITIME BOARD, DID NOT AND COULD NOT HAVE RENDERED NUGATORY THE STATUTORY REQUIREMENT THAT THE DETERMINATIONS PRESCRIBED IN SECTION 211 MUST BE MADE PRIOR TO AN EFFECTIVE AWARD OF SUBSIDY AND THAT THE AUTHORITY OF THE BOARD TO CONTRACT FOR THE AWARD OF SUBSIDY IS CIRCUMSCRIBED AND LIMITED BY THE SECTION 211 DETERMINATIONS. ACCORDINGLY, THE PROVISIONS OF SECTION 606 (3) AND ARTICLE I-2 (E) MUST BE CONSTRUED AS SUBJECT TO THOSE LIMITATIONS. TO CONCLUDE THAT THE EXTENDED VOYAGES OF THE EXTENT HERE PROPOSED COULD BE CONSIDERED MERE DEVIATIONS OF AN AUTHORIZED SUBSIDY SERVICE OR THAT THE PROVISIONS OF SECTION 606 (3) AND ARTICLE I-2 (E) AUTHORIZE SUBSIDIZATION OF A NEW SERVICE BEYOND THAT CIRCUMSCRIBED BY THE ADMINISTRATOR'S DETERMINATIONS REGARDING THE INDEPENDENCE AND CONSTITUTION PASSENGER SERVICE, AS SET FORTH IN THE CONTRACT, WOULD BE TO CIRCUMVENT THE CLEAR INTENTION OF THE STATUTE.

IT IS ARGUED THAT TOO MUCH EMPHASIS HAS BEEN PLACED ON THE FACT THAT THE EXTENDED VOYAGES ARE REFERRED TO AS "CRUISES" WHEN IN FACT THE VESSELS COVER THE REGULAR SERVICE AND TAKE AWAY CARGO AND PASSENGERS. HOWEVER, IT SEEMS APPARENT THAT AN EXTENDED VOYAGE WHICH APPROXIMATELY DOUBLES THE TURNAROUND TIME OF THE REGULAR VOYAGE MAY NOT REASONABLY BE CONSIDERED A "DEVIATION" WITHIN THE GENERAL TRADE AREA OF THE REGULAR SERVICE. CONSEQUENTLY, AS HEREINBEFORE STATED, IT APPEARS THAT THE PROPOSED EXTENDED VOYAGES CONSTITUTE IN EFFECT A "NEW SERVICE" WHICH REQUIRES, INTER ALIA, THAT THE ADMINISTRATOR DETERMINE THAT A MINIMUM SERVICE THEREON OF ONE VOYAGE A YEAR MEETS THE OBJECTIVE OF THE 1936 ACT AS EXPRESSED IN SECTION 101, AND THE CRITERIA SET FORTH IN SECTION 211 (B).

SUMMARIZED BRIEFLY, THE 1936 ACT AND REORGANIZATION PLAN NO. 21 OF 1950 CONTEMPLATE, INSOFAR AS PERTINENT HERE, THAT THREE STEPS WHICH MUST BE TAKEN PRIOR TO AN EFFECTIVE AWARD OF SUBSIDY ARE:

1. THE ADMINISTRATOR MUST INVESTIGATE AND DETERMINE WHAT ROUTES, SERVICES, OR LINES ARE ,ESSENTIAL FOR THE PROMOTION, DEVELOPMENT, EXPANSION, AND MAINTENANCE OF THE FOREIGN COMMERCE OF THE UNITED STATES.' SECTION 211 (A).

2. THE ADMINISTRATOR MUST INVESTIGATE AND DETERMINE THE PHYSICAL REQUIREMENTS OF THE VESSELS ,WHICH SHOULD BE EMPLOYED IN SUCH SERVICES OR ON SUCH ROUTES OR LINES, AND THE FREQUENCY AND REGULARITY OF THE SAILINGS OF SUCH VESSELS, WITH A VIEW TO FURNISHING ADEQUATE, REGULAR, CERTAIN, AND PERMANENT SERVICE.' SECTION 211 (B).

3. THE BOARD MUST DETERMINE THAT OPERATING-DIFFERENTIAL SUBSIDY IS NECESSARY TO MEET FOREIGN COMPETITION IN THE ESSENTIAL SERVICES DETERMINED BY THE ADMINISTRATOR UNDER SECTION 211. SECTION 601 (A).

ACCORDINGLY, IN THE ABSENCE OF THE NECESSARY DETERMINATIONS BY THE ADMINISTRATOR WITH RESPECT TO THE NEW (OR CHANGED) SERVICE REPRESENTED BY THE CRUISE, OR EXTENDED VOYAGES, THE STATUTORY PREREQUISITE TO AN EFFECTIVE AWARD OF OPERATING-DIFFERENTIAL SUBSIDY THEREON BY THE BOARD HAS NOT BEEN MET. HOWEVER, IF IN ADDITION TO THE REPORTED FINDINGS AND DETERMINATIONS BY THE BOARD UNDER SECTION 601, THE ADMINISTRATOR DETERMINES THAT THE OPERATION OF A MINIMUM OF ONE EXTENDED VOYAGE BY THE INDEPENDENCE OR CONSTITUTION PER ANNUM ON ESTABLISHED TRADE ROUTES 10 AND 18 PROVIDES A PASSENGER SERVICE OF SUFFICIENT "FREQUENCY AND REGULARITY" TO FURNISH "ADEQUATE, REGULAR, CERTAIN, AND PERMANENT SERVICE," WE PERCEIVE NO LEGAL BASIS UPON WHICH WE COULD OBJECT TO THE PAYMENT OF SUBSIDY WITH RESPECT TO THE SUBJECT PAST VOYAGES OR TO AN AMENDMENT OF THE CONTRACT TO PROVIDE SUBSIDY ON THE FUTURE VOYAGES.