The United States Court of Appeals yesterday reversed a lower court ruling that allowed the owners of an American supertanker to return the federal subsidy they used to build the ship so the vessel could be placed in domestic service.
In unusually strong language, the appellate court brushed aside the reasoning of U.S. District Court Judge Charles R. Richey, describing the lower court's ruling in one instance as "convoluted."
The effect of the ruling, involving the 225,000 ton oil tanker Stuyvesant which was build by the Seatrain Shipbuilding Corporation, is to reimpose a federal legislative ban on the use of the ship for domestic transport.
The Stuyvesant was built at a cost of $102.7 million and with government subsidies in excess of $27 million under a provision of the Merchant Marine Act of 1936 that permitted the federal government to help build ships that would then be used exclusively for foreign trade.
Congress amended the law in 1938 to remove ambiguities concerning exceptions to the ban on domestic use of American ships built with government subsidy. As the law emerged after the amendments were passed, the Secretary of Commerce could permit a subsidized ship to be used in domestic trade for not more than six months in any year.
After the Stuyvesant was built, the appellate court said, it became clear to its owners that the intended foreign trade had not materialized. At the same time, however, a glut of oil on the West Coast, because of the Alaska pipeline's completion, had created a need to ship oil to the East Coast.
After negotiations between the ship's owners and the federal government, the government agreed to lift restrictions permanently and the ship's owners agreed to repay the subsidy in 40 semiannual payments over a 20-year period.
"To permit a ship heavily subsidized in its construction cost to compete with unsubsidized U.S.-built ships is to introduce into the domestic portion of our maritime trade a totally variable and incalculable factor," U.S. Circuit Court Judge Malcolm R. Wilkey wrote in the Court of Appeal's opinion.
In a dissenting opinion, U.S. Circuit Court Judge David L. Bazelon said that full repayment of the subsidy would place the ship "on an equal footing" with unsubsidized American ships "and the possibilities of abuse are thereby eliminated."