A US federal court has ordered the Maritime Administration (MarAd) to elaborate on why it allowed an APL Marine Services ship into a government subsidy programme.
The ruling came out of rival Matson's 18-month-long legal dispute with MarAd's parent agency, the Department of Transportation, over the addition of two APL ships to the Maritime Security Program (MSP) in 2015 and 2016 as replacements for other ships.
"The agency either completely failed to explain its reasons for approving [the 1,638-teu APL Saipan (built 2002)] or entirely failed to consider an important aspect of the question before it," District of Columbia federal court Judge Randolph Moss wrote in an opinion last Friday.
The APL Saipan was one of two ships, along with the 1,078-teu APL Guam (built 2001), that Matson has sought to remove from the MSP amid increased competition in the Guam trade. The MSP provides 60 US-flagged ships in international trade $5m each in exchange for government use in case of war or national emergency.
In its November 2018 lawsuit, the Hawaiian boxship owner argued the ships were unlawfully allowed to join the programme as their service to Guam constituted domestic, not international trade.
Territory not covered
Moss ruled that Matson did not have standing to challenge the APL Guam's 2015 approval, but that there were questions regarding the APL Saipan's approval the next year.
He wrote that MarAd had provided legal rationale for the two ships' service to Guam — which is allowed with certain endorsements — but not the APL Saipan's service to the North Mariana Islands, a US territory not covered by the endorsements.
The issue was brought up in a letter from US Senator Mazie Hirono, a Democrat representing Hawaii, ahead of the APL Saipan's approval.
Nor, Moss wrote, did it say how it interpreted the law that governs the MSP and how it relates to the APL Saipan.
Moss declined to vacate the APL Saipan's inclusion in the MSP, citing military readiness issues. He will allow Matson, APL and the Department of Transportation to provide submissions for or against vacatur in the coming weeks.
Neither APL nor the Department of Transportation immediately returned requests for comment.
Ongoing fight
Matson first had challenged the APL Guam and APL Saipan's acceptance into the MSP in 2017 in an administrative appeal and later in a federal court appeal.
It failed in both attempts.
Since APL launched the service from the US west coast to Guam in late 2016, Matson's container volume to the US territory has fallen from 25,800 boxes in 2016 to 19,400 in 2019.
The New York-listed company's chief executive, Matt Cox, has described the competition as an "axe fight" in earnings calls.
Both Matson and APL provide a weekly service from the US west coast to the Guam.
APL has eight ships in the MSP, bringing in a total of $40m.
