DMC Category Rating: Developed

Prepared By Brian Tretter, an attorney with Healy & Baillie, LLP, New York. Healy & Baillie are the International Contributors to the website for the United States

The vessel manager first requested a formal ruling from CBP as to who - between the vessel manager and the time charterer - would be considered the "carrier" for the purpose of complying with these regulations. By letter response, CBP informed the vessel manager that it was "unable to dictate responsibilities between private parties in this regard." The letter further stated that under the regulations the vessel owner or operator is responsible for compliance and any civil penalty would be assessed against the master of the vessel. The letter further stated, however, that it would be "appropriate" for the owner or operator to contractually arrange for the time charterer to be considered the "carrier" for the purposes of these regulations.

The time charter was signed before the promulgation of these regulations and there was no provision determining which party was responsible for compliance. After receiving CBP’s letter, the vessel manager thus filed its petition against the time charterer in the District Court seeking a declaratory judgment on this issue.

The time charterer opposed the petition on the grounds that (1) the Court lacked subject matter jurisdiction, (2) the vessel manager lacked standing to bring the suit, presumably because it was not a party to the contract, (3) the dispute was governed by the arbitration clause of the charter party, and (4) the vessel manager was not entitled to relief because the parties’ roles in respect of the cargo, the statutory and regulatory language, and the CBP letter all indicated that the vessel manager was responsible for compliance.

The vessel manager claimed the Court had original jurisdiction of this action because it arose "under the Constitution, laws, or treaties of the United States." It further claimed that jurisdiction arose because there was a strong federal interest in national security, which compliance with the Trade Act was intended to increase.

Judgment
The Court disagreed with these arguments. While recognizing that the federal government had a strong federal interest in ensuring compliance with the Trade Act, the Court found no such strong federal interest in this case. The Court stated that the case did not involve a question of whether the regulations should be complied with, but rather concerned the issue of who should provide the information necessary for compliance. Thus, this was a dispute between two private parties regarding their obligations under federal law, "which in and of itself does not support a finding of substantial federal question."

The Court stated that the Trade Act did not appear to provide the vessel manager with a "privately enforceable remedy for non-compliance, given that express enforcement provisions are directed towards the federal government." The Court stated that, in these circumstances, there was no apparent case or controversy over which it had jurisdiction. Therefore, the Court held that it lacked jurisdiction to hear the case and give the advisory opinion that the vessel manager was seeking and accordingly dismissed the vessel manager’s petition.

Comment
This decision highlights the uncertainty which still prevails over the ultimate responsibility as between owner and time charterer for compliance with these new regulations and serves to underscore the importance of addressing this obligation in the governing charter contract.