Judicial Decision on M/V Mokihana Rebuild

Friday, December 11, 2009

On December 4, 2009, a federal district court in Va. entered judgment in favor of the U.S. Coast Guard and Matson Navigation Company, Inc. in a long-running vessel foreign rebuild case.  Winston & Strawn LLP represented Matson.

The Shipbuilders Council of America, Inc. and Pasha Hawaii Transport Lines LLC sued the Coast Guard initially in November 2006 seeking to disqualify the M/V Mokihana from the U.S. coastwise trade because of work to be done to the vessel in China. That initial suit was dismissed in 2007, but then re-initiated on December 10, 2007 after the work on the M/V Mokihana was complete.  The M/V Mokihana, a container ship, had work done in China to prepare the vessel for the addition of a roll-on/roll-off garage added to the stern of the vessel in Alabama. 

U.S coastwise laws – commonly referred to as the Jones Act – generally restrict U.S. coastwise trade to U.S. constructed vessels.  In connection with that U.S. build requirement, otherwise eligible coastwise vessels permanently lose their ability to participate in the U.S. coastwise trade if they are “rebuilt” foreign. 

The Coast Guard determines whether foreign shipyard work is disqualifying pursuant to a regulation it issued in 1996.  That regulation provides that a vessel is considered rebuilt foreign “when a major component of the hull or superstructure not built in the United States” is added to the vessel or if “work performed on its hull or superstructure constitutes more than 10 percent of the vessel’s steelweight.”  Steel work in excess of 7.5 percent but less than 10 percent of the vessel’s steelweight can also be disqualifying unless the Coast Guard in its discretion approves the amount.

The regulations also provide a process for ship owners to approach the Coast Guard and obtain a preliminary rebuild determination in advance of the shipyard work being done in order to obtain some assurance that the work won’t be disqualifying.  Matson sought and obtained both a preliminary and a final rebuild determination from the Coast Guard to the effect that the work to be done to the M/V Mokihana would not result in the vessel being considered “rebuilt.” 

Shipbuilders and Pasha advanced a number of arguments claiming that the Coast Guard acted arbitrarily and contrary to law in issuing those determinations.  Among other things, Shipbuilders/Pasha argued that the claimed addition of a deck in China was the addition of a “major component,” that the Coast Guard incorrectly excluded certain outfitting items from the steel calculation (such as auto platforms) and should have counted both removed and added steel in that calculation.  Initially, Shipbuilders/Pasha also argued that the work done in Alabama should have been cumulated with the work done in China in determining whether a foreign “rebuild” had occurred.

The “major component” issue was decided against the Coast Guard in a related case involving two Seabulk tank vessels which had been “double hulled” in China.  However, the district court’s decision in Seabulk case was reversed by the U.S. Court of Appeals for the Fourth Circuit in favor of the Coast Guard on August 21, 2009.  On appeal, the Coast Guard’s view that a “major component” should be judged based on whether it is “separable” was validated.  On that basis, the Coast Guard found that the addition of an inner hull piece-by-piece was not the addition of a “major component.” 

On December 3, 2009, federal judge T.S. Ellis, III concurred and found that the addition of a deck piece-by-piece to the M/V Mokihana, none of which was “major,” did not constitute the addition of a “major component” within the meaning of the Jones Act.  Judge Ellis also rejected Shipbuilders/Pasha’s other arguments finding in each instance that the actions of the Coast Guard were reasonable and within its lawful discretion.  Finally, Judge Ellis concluded the Coast Guard was correct in focusing on the foreign portion of the work in assessing whether there was a foreign “rebuilding” under the law.

Maritime Reporter August 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Legal

Deadliest Weekend Ever in the Mediterranean: UNHCR

More than 700 people fleeing Africa and the Middle East may have drowned in shipwrecks in the Mediterranean over the last week, bringing the death toll this year to almost 3,

Seaspan Agreement with GCII & Blue Water

Seaspan Corporation announced today that it has entered into an agreement with Greater China Intermodal Investments LLC and Blue Water Commerce, LLC to extend

Deal to End Lockout at Canada Uranium Mine

Canadian uranium producer Cameco Corp and the United Steelworkers union, which represents 535 workers at the world's largest uranium mine and a nearby mill,

Shipbuilding

Austal Delivers Fourth JHSV to the US Navy

The U.S. Navy accepted delivery of USNS Fall River (JHSV 4) from Austal USA yesterday, a week shy of six months from the date they took delivery of JHSV 3. This

Cook Joins Horizon Shipbuilding as Operations VP

Horizon Shipbuilding, Inc. announced that Mickey Cook has joined the corporation as the Vice President of Operations for the Bayou La Batre shipyard. Cook, one of the founders of C & G Boatworks,

Survey Vessel Delivered to Fugro N.V.

Fugro Pioneer is the second of three vessels to be delivered to Fugro in 2014. Fugro has taken delivery of the second of the three Fugro Offshore Coastal Survey

 
 
Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Naval Architecture Pipelines Port Authority Ship Electronics Ship Repair Sonar Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1299 sec (8 req/sec)