Philadelphia shipyard wins battle with union

A federal judge in Philadelphia has refused to strike down the Coast Guard's interpretation of regulations on construction of ships for the domestic Jones Act trade, thwarting a union challenge on the right of a series of tankers being built at the Aker Philadelphia Shipyard to trade along the U.S. coasts.

Judge Gene E.K. Pratter of the U.S. District Court for the Eastern District of Pennsylvania granted a motion for summary judgment to the Coast Guard, turning down a challenge by the Philadelphia Metal Trades Council, of the Metal Trades Department of the AFL-CIO.

Although Metal Trades members help build the ships, the union's president Ron Ault has called them kit ships saying they are made, in part, with components that are put together abroad by foreign workers, denying work to U.S. shipyard workers.

The Coast Guard's interpretation of the regulation at issue is reasonable in terms of the text, history and purpose of the Jones Act, Pratter said. The Jones Act requires ships that trade between U.S. ports and terminals to be built in U.S. shipyard as well as be registered in the U.S. and crewed by Americans.

Jim Miller, president and chief executive of the shipyard, said he was satisfied with the court's decision, and by working closely with our skilled union work force will continue to deliver on our promise to build quality ships for the U.S. market.

Pratter noted the Coast Guard regulations say that to be considered U.S. built, a vessel must have all major components of its hull and superstructure fabricated in the United States and assembled entirely in the United States.

In an opinion littered with dictionary citations, discussions of parts of speech and writing as well as legal precedents, Pratter said, Having waded into the more than 400 pages devoted by these parties to their arguments about the clarity of this regulation, the court finds that the regulation is ambiguous.

Nevertheless, after weighing arguments about the text, legislative history and purpose of the regulation, she ruled in favor of the government.

Because the Coast Guard appears to have considered the Jones Act's purposes in ruling as it did, this is additional cause for the court to find that the ruling is not unreasonable, she explained.

Pratter cited a 1998 decision, which said an agency's interpretation need not further every statutory purpose, and said, where Congress has entrusted the agency to make these judgment calls, it is not for the courts to upset the rational balance the agency has struck.

Ault of the Metal Trade Department, said, "If we find the basis for an appeal in her decision, we will appeal.

Naturally we are disappointed, but given the political climate for workers in America fighting corporate power in courts with the majority of Republican appointed judges that were former corporate lawyers, is a big heavy lift, no matter how good a case we have, Ault said.

We will never accept such a convoluted decision that essentially says they can float a barge from Communist China and as long as we "final assemble the minimum amount of parts (subject to changing Coast Guard rules) it meets the requirements of a Jones Act ship to be manufactured in the USA and assembled entirely in the USA.

Aker has built four tankers, recently began conducting sea trials on a fifth, and has three additional tankers under construction. The ships are being sold to a former affiliate, American Shipbuilding Co., which then bareboat charters them to OSG America. The identical tankers are part of a series of a dozen 46,814 dwt tankers the yard is building for eventual charter by OSG.

The Aker decision is one of several disputes being heard by the courts on what repair and construction work on vessels can be done abroad.

In April a Virginia court said the Coast Guard had improperly issued a coastwise endorsement to a SEACOR tanker after it had undergone modification work at a shipyard in China.

Seacor said it believes the court erred and said it will vigorously pursue all appropriate channels of relief. On July 25 the court stayed revocation of the tanker's coastwise endorsement while instructing the Coast Guard to complete proceedings within 90 days.

But Seacor said, Permanent loss of coastwise eligibility for its two retrofitted tankers could adversely affect the company's financial condition and its results of operations, noting the carrying value of the tanker and a sister ship also retrofitted in China was $63.5 million and that they contributed operating revenues of $12.6 million during the first six months of the year.

The Shipbuilders Council of America Inc. and Pasha Hawaii Transport Lines LLC have also filed a suit against the Coast Guard, saying it improperly granted coastwise trading privileges to a Matson ship, the Mokihana over work done in China of work that added decks for roll-on/roll-off cargo.

Oral arguments on that case were heard by a Virginia Court in June. 

Source: American Shipper