Independent U.S. Tanker Owners Committee v. Dole
809 F.2d 847, 258 U.S. App. D.C. 6 (1987)
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Rule of Law:
Under the Administrative Procedure Act, an agency's rulemaking is arbitrary and capricious if its statement of basis and purpose fails to provide a reasoned explanation of how the rule serves the specific objectives of its governing statute, and instead relies on general, non-statutory policy goals.
Facts:
- The Merchant Marine Act of 1936 authorized federal subsidies for the construction of U.S. ships intended for foreign commerce.
- As a condition of receiving a construction-differential subsidy (CDS), these ships were generally prohibited from operating in domestic trade.
- Domestic shipping is protected from foreign competition by the Jones Act, which requires cargo between U.S. points to be carried on U.S.-built and owned ships.
- Following the opening of the Trans-Alaska Pipeline in 1977, a shortage of large tankers developed in the domestic market to transport Alaskan oil.
- To address this shortage and the poor economic prospects for subsidized tankers in foreign trade, the Secretary of Transportation promulgated a 'payback rule'.
- This rule permitted any tanker built with a CDS to permanently enter the domestic shipping market upon repayment of the unamortized portion of its subsidy plus interest.
Procedural Posture:
- The Secretary of Transportation promulgated the Construction-Differential Subsidy Repayment rule (the 'payback rule').
- A group of unsubsidized tanker owners (Appellants) challenged the rule's validity in the U.S. District Court.
- The district court, as the court of first instance, sustained the validity of the rule.
- The unsubsidized tanker owners (Appellants) appealed the district court's decision to the U.S. Court of Appeals for the D.C. Circuit.
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Issue:
Is a rule promulgated by the Secretary of Transportation arbitrary and capricious when the agency's statement of basis and purpose justifies the rule based on general policies of economic efficiency and deregulation, without adequately explaining how the rule serves the specific objectives enumerated in the Merchant Marine Act of 1936?
Opinions:
Majority - Bork, Circuit Judge
Yes, a rule is arbitrary and capricious when the agency's justification fails to connect the rule to the governing statute's specific objectives. While the Secretary possessed the statutory authority to create a payback rule under the Merchant Marine Act, the promulgation of this specific rule was procedurally deficient under the Administrative Procedure Act (APA). The APA's requirement for a 'concise general statement of their basis and purpose' obligates an agency to explain how its rule furthers the statutory objectives Congress has laid out. Here, the Secretary's justification relied heavily on non-statutory policy goals such as 'economic efficiency,' 'increased competition,' and 'deregulation,' while providing only cursory, conclusory, and unsatisfying explanations of how the rule served the Merchant Marine Act's specific goals, such as maintaining a merchant marine sufficient for commerce and as a naval auxiliary. An agency is not free to substitute its own policy goals for those explicitly mandated by Congress without a thorough explanation of how those new goals are consistent with its statutory authority.
Analysis:
This case reinforces the 'hard look' doctrine of judicial review in administrative law, emphasizing that an agency's duty to provide a reasoned explanation for its rules is a substantive requirement. It clarifies that an agency cannot justify its actions by merely invoking broad policy preferences like deregulation or free-market principles, especially when those preferences conflict with or are not explicitly part of the governing statute's enumerated objectives. The decision serves as a significant check on the executive branch's ability to implement its own policy agenda through rulemaking, requiring agencies to demonstrate that their actions are faithful to the specific legislative goals set by Congress.
