As we covered in the recent article, “A Post-Chevron Landscape for LHWCA Claims,” the effects of the Supreme Court’s decision in Loper Bright Enterprises et al. v. Raimondo, Sec. of Comm., et al.[1] continue to take shape across the landscape of regulated industries since it overturned the 40-year-old administrative law doctrine known as “Chevron deference.”[2]
Under Chevron, courts applied a two-step analysis to review agency action. First, the court was to “discern whether Congress had directly spoken to the precise question at issue.” If Congress’s intent was clear, this was the end of the inquiry, and any contrary agency action was rejected. Where a statute was silent or ambiguous, the reviewing court would then defer to the relevant agency’s interpretation of the statutory language if the agency had offered a “permissible construction of the statute.”
Loper Bright curtails this two-step approach, instead holding that courts were exclusively delegated the responsibility to interpret statutes first by the Constitution and subsequently by the Administrative Procedure Act. Essentially, the Supreme Court has determined that courts are best tasked with interpreting the laws enabling the federal government’s administrative agency actions without deference to the agencies’ views on potential gray areas.
As a heavily regulated industry in the U.S., the maritime industry is not immune from Loper Bright’s potential implications. The U.S. Coast Guard (“USCG”), the Maritime Administration (“MARAD”), Customs and Border Protection (“CBP”), the Federal Maritime Commission (“FMC”), and the Bureau of Safety and Environmental Enforcement (“BSEE”), among others, are charged with varying degrees of regulatory oversight for maritime matters, each of which could be meaningfully affected by the Loper Bright decision.
Jones Act Coastwide Trade Considerations
Loper Bright could have significant implications for vessels seeking citizenship and coastwise endorsements to operate in U.S. waters. The Merchant Marine Act of 1920 and Section 27, also known as the “Jones Act,” outlines the requirements for vessels to establish U.S. citizenship and qualify for coastwise trade. The longstanding Chevron deference has played a role in the Jones Act requirement that a vessel must be U.S.-built, U.S.-crewed, and seventy-five percent U.S.-owned to qualify for operation in U.S. coastwise trade, such as transporting merchandise between two coastwise points in the U.S.
The U.S. Coast Guard (USCG) is responsible for enforcing the Jones Act’s U.S.-build determinations, U.S.-ownership qualifications, and U.S.-crewing requirements. Over time, key terms under the Jones Act, such as “built,” “owned,” “crewed,” “transport,” “merchandise,” “between,” “coastwise points,” and “in the United States,” have accumulated a well-developed body of interpretive doctrine in practice through agency review and interpretation. The USCG is the authority for issuing all coastwise trade endorsements that designate a vessel as “coastwise qualified.”
Moreover, the USCG and MARAD are regularly called upon to evaluate proposed ownership structures and financial arrangements for newbuild vessels seeking U.S.-flag and/or coastwise endorsement, as well as for the sale and transfer of qualified vessels among owners and operators. The USCG issues determination letters in response to requests seeking confirmation that proposed ownership structuring mechanisms comply with U.S. regulatory requirements. The Jones Act requires a two-step analysis regarding ownership of Jones Act-qualified vessels: (1) “Documentation Act Citizen” qualification and (2) beneficial ownership requirements.
Over the years, both USCG and MARAD have developed comprehensive interpretive frameworks to assess various proposed corporate structures, providing guidance for the U.S. shipbuilding and vessel transaction markets for decades. The USCG also assesses whether work performed on coastwise qualified and/or U.S.-flagged vessels complies with statutory limitations on work performed at foreign yards. Arguably, the Loper Bright decision could disrupt this model, leading to significant uncertainty across the industry on how to structure transactions to comply with Jones Act citizenship requirements and potentially having a notable effect on near-term new builds, vessel financing, and M&A transactions.
Ensuring Environmental Compliance under OPA 90
Loper Bright also presents potential legal challenges to interpreting the Oil Pollution Act of 1990 (OPA 90). The Coast Guard, under OPA 90, may face challenges regarding their authority to determine which removal costs should be covered by the Oil Spill Liability Fund. OPA 90 includes provisions for the recovery of pure economic loss and other factors that can affect a responsible party, and there has been ambiguity found in certain provisions of the act. This is important because OPA 90 outlines situations where liability for a responsible party may be unlimited. The U.S. Coast Guard’s interpretations of OPA 90 have focused on whether P&I clubs can use any policy defenses concerning oil pollution liability and on Congress’ intent related to direct action against insurers. Courts have also examined cases where marine pollution insurance carriers have challenged decisions made by the USCG National Pollution Funds Center (NPFC) and an insurer’s OPA claim for reimbursement for oil spill removal costs.
Maintaining Marine Safety
The U.S. Coast Guard plays a crucial role in overseeing maritime security and safety issues. When it comes to maritime accidents, courts have assessed the agency’s interpretation of the Safety Management System in determining the causes of such accidents, as well as the navigation decisions made by pilots and crew under the 1972 International Regulations for Preventing Collisions at Sea (COLREGS). Moving forward, uncertainty in regulations may arise due to new technologies, such as those related to alternative fuels and air emissions under the Clean Air Act, reduced crewing on autonomous vessels, as well as outer space launch and reentry operations.
Additionally, the Coast Guard may face future challenges in regulating cybersecurity on facilities, vessels, and in the OCS, and ensuring compliance with various International Maritime Organization Conventions that significantly impact U.S. ocean commerce, including the International Ship and Port Facility Security Code.
Conclusion
These are just a few of the maritime-related issues that could be subject to litigation with different or new outcomes under Loper Bright. However, the real-world implications of this decision remain uncertain.
[2] Chevron U.S.A. Inc., v. Natural Resources Defense Council, Inc., 47 U.S. 837 (1984).