Company had questioned decision to allow APL to put ships into trade.
The U.S. Court of Appeals for the District of Columbia Circuit this week dismissed a petition by Matson Navigation Co. asking it to review the Maritime Administration’s decision to allow APL to replace two ships it had enrolled in the Maritime Security Program (MSP), ships that were then put into the Guam trade where APL uses them to compete with Matson.
APL started its Guam service in 2016 with a single ship, the APL Guam, and added a second ship, the APL Saipan, in 2017.
The court dismissed the Matson petition, saying Matson was too late in filing its challenge of MarAd’s decision to allow the first ship into the MSP fleet and that with the second ship it did not have jurisdiction under the so-called Hobbs Act, which allows some Department of Transportation administrative orders to be appealed directly to an appeals court. The D.C. Circuit said Matson must initially pursue that challenge in federal district court.
Matson questioned whether the corporate owners of the APL ships met the citizenship requirements needed under the MSP program.
A Matson spokesman said its counsel is reviewing the decision. It is not clear if it would pursue the case further.
APL said in a statement, “Although the court’s decision leaves open the possibility that Matson could reassert at least part of its challenge in a different forum, nothing in the court’s opinion provides any basis to think it would succeed. We remain confident that Matson’s challenge to our MSP participation is completely lacking in merit as the courts have ruled.”
APL uses the two ships in its weekly Guam Saipan Express (GSX) service to shuttle cargo between Yokohama, Japan, Busan, Korea, and two western Pacific islands: Saipan in the Northern Mariana Islands, a U.S. commonwealth and Guam, a U.S. territory. Cargo from points around the world is transshipped at Yokohama, which is also served by APL’s U.S.-flag Eagle Express service between the U.S. West Coast and Asia.
APL said its GSX service “has just been improved to offer the earliest arrival in the week in Guam on Mondays and Saipan on Tuesdays. We have also shortened the overall transit time by three days.”
APL said “both ships that are deployed for the weekly GSX service are over 1,000 TEUs each. They adequately serve our current business and are primed to develop further, including breakbulk cargo. We have a robust double digit market share in terms of cargo volume from the United States, Asia and other parts of the world to Guam.”
According to the court decision, Matson urged MarAd not to allow APL to operate the two ships in the U.S.-Guam trade route, saying they did not meet the requirements for replacement vessels in the MSP program, and said their operation was “distorting the market and creating an unlevel playing field” in service to Guam.
The Maritime Security Program provides a stipend for the operation of 60 privately owned ships that are deemed to be militarily useful in exchange for the owners’ promise to make them available in time of war or national emergency. The stipend is to help offset the cost of operating U.S.-flag ships in international trade with U.S. seafarers where they must compete with lower cost foreign tonnage operated with foreign crews.
Operators of ships in the cabotage trades between points in the United States, such as the trade between the U.S. West Coast and Hawaii, are not eligible for MSP subsidies. Those services are already protected from foreign flag competition by the Jones Act which require participants to use U.S.-flag ships built in the United States and crewed by U.S. citizens.
Matson questioned “whether assistance payments awarded to support U.S.-flag vessels operating in the international trades under the Maritime Security Program … can be used to subsidize vessels operating in regular service in Guam, a domestic trade.” It argued the replacement vessels did not operate in foreign commerce and were not commercially viable.
MarAd rejected Matson’s appeal, saying Matson did have standing to bring the complaint because it was not a participant in the MSP program. It also said that APL’s ships are not in a purely domestic service, but carry both foreign and domestic cargo.
Matson is a longtime participant in the Guam trade.
Unlike APL, which carries cargo from the U.S. West Coast and transships it through Yokohama, Matson carries Guam-bound cargo on its transpacific service that has a Long Beach-Honolulu-Guam- Okinawa-Ningbo-Shanghai-Long Beach rotation. From Guam Matson offers connecting services to other destinations in Micronesia — Saipan/Tinlan/Rota, Yap, Palau, Chuuk, Pohnpei, Kosrae, Ebeye/Kwajalein and Majuro.
In its annual report, Matson noted its fourth-quarter volumes in 2017 were below that in 2016 because of the APL service, which increased its service frequency to become weekly in December 2016. Matson said it expected heightened competition this year and in the first quarter of 2018 it noted its Guam volume was 9,800 TEUs, 1,000 TEUs or 9.3 percent less than in the first quarter of 2017.
However, Matson noted its business elsewhere in the Pacific to Micronesia, South Pacific and Okinawa was booming. It moved 6,200 TEUs to and from those regions in the first quarter, 47.6 percent more than in the first quarter of 2017.
Matson launched its service to the port of Naha in Okinawa, Japan, in September 2017.
Court dismisses Matson challenge of Guam service
