B-135555, JUNE 19, 1958, 37 COMP. GEN. 836

B-135555: Jun 19, 1958

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AFTER A STUDY INDICATED A SUBSTANTIAL INCREASE IN THE PASSENGER TRAFFIC ON THE ROUTES SERVICED BY THE VESSELS AND THAT THE RECONSTRUCTION WAS NECESSARY TO MEET FOREIGN COMPETITION. IS IN COMPLIANCE WITH SECTION 501 (C) OF THE MERCHANT MARINE ACT. 1958: REFERENCE IS MADE TO YOUR LETTERS OF MARCH 18 AND MAY 1. REQUESTING ADVICE AS TO WHETHER WE CONCUR IN THE VIEW OF THE FEDERAL MARITIME BOARD THAT IT IS PROPER FOR THE BOARD TO GRANT CONSTRUCTION DIFFERENTIAL SUBSIDY AID UNDER SECTION 501 (C) OF THE MERCHANT MARINE ACT. SHALL DETERMINE THAT THE GRANTING OF FINANCIAL AID IN RECONSTRUCTING OR RECONDITIONING ANY VESSEL THAT IS TO BE USED IN THE FOREIGN COMMERCE OF THE UNITED STATES IS REASONABLY CALCULATED TO CARRY OUT EFFECTIVELY THE PURPOSES AND POLICY OF THE ACT.

B-135555, JUNE 19, 1958, 37 COMP. GEN. 836

MARITIME MATTERS - SUBSIDIES - ELIGIBILITY - RECONSTRUCTION - ADMINISTRATIVE DETERMINATION A DETERMINATION TO GRANT A CONSTRUCTION-DIFFERENTIAL SUBSIDY FOR THE RECONSTRUCTION AND RECONDITIONING OF THE S.SS. CONSTITUTION AND INDEPENDENCE MADE BY THE FEDERAL MARITIME BOARD, AFTER A STUDY INDICATED A SUBSTANTIAL INCREASE IN THE PASSENGER TRAFFIC ON THE ROUTES SERVICED BY THE VESSELS AND THAT THE RECONSTRUCTION WAS NECESSARY TO MEET FOREIGN COMPETITION, IS IN COMPLIANCE WITH SECTION 501 (C) OF THE MERCHANT MARINE ACT, 1936, 46 U.S.C. 1151 (C), WHICH AUTHORIZES THE GRANTING OF FINANCIAL AID FOR VESSEL RECONSTRUCTION IN EXCEPTIONAL CASES AFTER A THOROUGH STUDY AND FORMAL DETERMINATION.

TO THE CHAIRMAN, FEDERAL MARITIME BOARD, JUNE 19, 1958:

REFERENCE IS MADE TO YOUR LETTERS OF MARCH 18 AND MAY 1, 1958, REQUESTING ADVICE AS TO WHETHER WE CONCUR IN THE VIEW OF THE FEDERAL MARITIME BOARD THAT IT IS PROPER FOR THE BOARD TO GRANT CONSTRUCTION DIFFERENTIAL SUBSIDY AID UNDER SECTION 501 (C) OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, 46 U.S.C. 1151 (C), FOR THE PROPOSED RECONSTRUCTION AND RECONDITIONING OF THE S.S. CONSTITUTION AND THE S.S. INDEPENDENCE.

AS YOU KNOW, SECTION 501 (C) PROVIDES, IN PERTINENT PART, THAT IF THE BOARD, IN THE EXERCISE OF ITS DISCRETION, SHALL DETERMINE THAT THE GRANTING OF FINANCIAL AID IN RECONSTRUCTING OR RECONDITIONING ANY VESSEL THAT IS TO BE USED IN THE FOREIGN COMMERCE OF THE UNITED STATES IS REASONABLY CALCULATED TO CARRY OUT EFFECTIVELY THE PURPOSES AND POLICY OF THE ACT, THE BOARD MAY APPROVE SUCH APPLICATION AND ENTER INTO A CONTRACT OR CONTRACTS WITH THE APPLICANT PROVIDING FOR THE PAYMENT BY THE UNITED STATES OF A CONSTRUCTION-DIFFERENTIAL SUBSIDY SUBJECT TO THE APPLICABLE CONDITIONS AND LIMITATIONS OF TITLE V OF THE ACT, 46 U.S.C. 1151. AS A PREREQUISITE, HOWEVER, THE SUBSECTION FURTHER PROVIDES THAT SUCH FINANCIAL AID SHALL BE AUTHORIZED ONLY IN "EXCEPTIONAL CASES" AND AFTER A THOROUGH STUDY AND FORMAL DETERMINATION BY THE BOARD THAT THE PROPOSED RECONSTRUCTION OR RECONDITIONING IS CONSISTENT WITH THE PURPOSES AND POLICY OF THE ACT.

MANIFESTLY, WHILE SECTION 501 (C) PROVIDES FOR THE GRANTING OF RECONSTRUCTION AND RECONDITIONING SUBSIDIES ONLY IN EXCEPTIONAL CASES, THE ACT PROVIDES NO STANDARDS FOR THE DETERMINATION OF WHAT MIGHT BE CONSIDERED EXCEPTIONAL. HENCE, IN THE ABSENCE OF SUCH CRITERIA, IT WOULD BE REASONABLE TO ASSUME THAT THE LEGISLATIVE INTENT IN THIS AREA WAS TO PLACE WITHIN THE DISCRETION OF THE BOARD THE RESPONSIBILITY FOR SUCH FINDING. HOWEVER, THE LEGISLATIVE HISTORY OF THE SECTION DOES INDICATE A RESTRICTION THAT CONSTRUCTION-DIFFERENTIAL SUBSIDY COVERING THIS TYPE OF WORK IS NOT TO BE PAID WITHOUT THE ABOVE-MENTIONED "THOROUGH STUDY" TO SUPPORT THE CONCLUSION THAT THE PROPOSED AID WOULD NOT CONTRAVENE THE PRIMARY PURPOSE OF THE PROVISION, I.E., TO PREVENT SUBSIDIZATION OF (1) THE RECONSTRUCTION OF OLDER VESSELS IN LIEU OF NEW CONSTRUCTION, AND (2) NORMAL MAINTENANCE AND REPAIR. ( SEE DEBATE ON FLOOR OF THE SENATE, JUNE 27, 1935, 79 CONG. REC. 10255. ALSO, SENATE COMMITTEE ON COMMERCE, 74TH CONG. ST SESSION, HEARINGS ON S. 2582).

IN CONSONANCE THEREWITH, IT APPEARS THAT THE MARITIME ADMINISTRATION HAS COMPLETED THE REQUIRED THOROUGH STUDY AND HAS RECOMMENDED THAT, BECAUSE OF DEVELOPMENTS IN THE PASSENGER SERVICE ON TRADE ROUTE NO. 10, THE APPLICATION OF AMERICAN EXPORT LINES, INC., CONTEMPLATES DEFINITELY NEEDED RECONSTRUCTION OF THE TWO PASSENGER VESSELS TO ASSIST THEM IN MEETING THE REQUIREMENTS OF SUCH SERVICE. IN SUPPORT OF THIS FINDING, IT IS NOTED THAT THE PASSENGER TRAFFIC ON TRADE ROUTE NO. 10 SERVICES IN 1952, THE FIRST FULL YEAR OF OPERATION OF THESE VESSELS, WAS 118,000 PASSENGERS, SINCE WHICH TIME THE TRAFFIC INCREASED TO 191,000 PASSENGERS IN 1956. FURTHERMORE, YOU ADVISE THAT THE INDEX OF PASSENGER TRAFFIC IN THE ATLANTIC, WHICH WAS 127 IN 1952, INCREASED TO 163 IN 1955. THEREFORE, IT WOULD APPEAR THAT AN UNUSUAL VOLUME OF PASSENGER TRADE HAS DEVELOPED SINCE 1952, AND IT IS REPORTED THAT NEW FOREIGN FLAG VESSELS CONSTRUCTED AFTER 1952 ARE HANDLING THIS INCREASE WITH LITTLE OR NO COMPETITION FROM AMERICAN FLAG VESSELS. CONSEQUENTLY, TO MEET THIS COMPETITION AND TO FURTHER DEVELOP THE FOREIGN COMMERCE OF THE UNITED STATES, THE ADMINISTRATION CONSIDERS THE NEED OF SUFFICIENT IMPORTANCE AND URGENCY TO QUALIFY THE PROPOSED RECONSTRUCTION AS AN EXCEPTIONAL CASE. ACCORDINGLY, ON THE BASIS OF SUCH STUDY, THE FEDERAL MARITIME BOARD HAS MADE A FORMAL DETERMINATION THAT SUCH RECONSTRUCTION IS CONSISTENT WITH THE PURPOSES AND POLICY OF THE ACT, AND NOW REQUESTS WHETHER WE CONCUR IN ITS VIEW THAT IT IS PROPER TO GRANT CONSTRUCTION-DIFFERENTIAL AID UNDER SECTION 501 (C).

WE HAVE REVIEWED THE ADMINISTRATION'S STUDY OF THE CIRCUMSTANCES LEADING TO THE PROPOSED RECONSTRUCTION AND RECONDITIONING WORK, TOGETHER WITH ITS RECOMMENDATION TO THE BOARD AND, IN THE LIGHT OF THE FOREGOING, WE PERCEIVE NO LEGAL BASIS FOR DISAGREEING WITH THE BOARD'S CONCLUSION THAT IT IS PROPER TO GRANT CONSTRUCTION-DIFFERENTIAL SUBSIDY WITHIN THE CONTEMPLATION OF THE STATUTE.