Shipbuilders Council of America v. United States Coast Guard

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

SHIPBUILDERS COUNCIL OF AMERICA, 
INCORPORATED; CROWLEY MARITIME
CORPORATION; OVERSEAS
SHIPHOLDING GROUP, INCORPORATED,
Plaintiffs-Appellees,
v.
UNITED STATES COAST GUARD;
UNITED STATES DEPARTMENT OF
HOMELAND SECURITY; NATIONAL
VESSEL DOCUMENTATION CENTER,
Defendants-Appellants,
SEABULK PETROLEUM TRANSPORT,  No. 08-1546
INCORPORATED; SEABULK ENERGY
TRANSPORT, INCORPORATED,
Intervenors/Defendants-Appellants,
and
US SHIPPING PARTNERS LLP,
Intervenor/Defendant,

MATSON NAVIGATION COMPANY,
INCORPORATED,
Amicus Supporting Appellants.

2 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD

SHIPBUILDERS COUNCIL OF AMERICA, 
INCORPORATED; CROWLEY MARITIME
CORPORATION; OVERSEAS
SHIPHOLDING GROUP, INCORPORATED,
Plaintiffs-Appellees,
v.
UNITED STATES COAST GUARD;
UNITED STATES DEPARTMENT OF
HOMELAND SECURITY; NATIONAL
VESSEL DOCUMENTATION CENTER,
Defendants-Appellants,
SEABULK PETROLEUM TRANSPORT,  No. 08-1702
INCORPORATED; SEABULK ENERGY
TRANSPORT, INCORPORATED,
Intervenors/Defendants-Appellants,
and
US SHIPPING PARTNERS LLP,
Intervenor/Defendant,

MATSON NAVIGATION COMPANY,
INCORPORATED,
Amicus Supporting Appellants.

Appeals from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Leonie M. Brinkema, District Judge.
(1:07-cv-00665-LMB-TRJ)

Argued: May 15, 2009

Decided: August 21, 2009

Before MOTZ, KING and DUNCAN, Circuit Judges.
 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD 3
Reversed and remanded by published opinion. Judge Duncan
wrote the opinion, in which Judge Motz and Judge King
joined.

COUNSEL

ARGUED: Monika L. Moore, OFFICE OF THE UNITED
STATES ATTORNEY, Alexandria, Virginia; Michael
Joseph, BLANK & ROME, LLP, Washington, D.C., for
Appellants. William D. Dolan, III, VENABLE, LLP, Vienna,
Virginia, for Appellees. ON BRIEF: Dana J. Boente, Acting
United States Attorney, Alexandria, Virginia, for Appellants
United States Coast Guard, United States Department of
Homeland Security, and National Vessel Documentation Cen-
ter. Alex Blanton, BLANK & ROME, LLP, Washington,
D.C., for Appellants Seabulk Petroleum Transport, Incorpo-
rated and Seabulk Energy Transport, Incorporated. Marc J.
Fink, Anne E. Mickey, Robert Magovern, SHER & BLACK-
WELL, LLP, Washington, D.C., for Appellee Shipbuilders
Council of America, Incorporated; Michael W. Robinson,
John F. Cooney, VENABLE, LLP, Vienna, Virginia, for
Appellee Crowley Maritime Corporation; Bernard J. DiMuro,
DIMUROGINSBURG, PC, Alexandria, Virginia, for Appel-
lee Overseas Shipholding Group, Incorporated. Gene C.
Schaerr, Constantine G. Papavizas, Andrew C. Nichols, WIN-
STON & STRAWN, LLP, Washington, D.C., for Amicus
Supporting Appellants.

OPINION

DUNCAN, Circuit Judge:

The United States Coast Guard appeals the district court’s
rejection of its interpretation of the regulatory scheme govern-
ing the issuance of coastwise endorsements to vessels. Inter-
4 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD
venors Seabulk Energy Transport, Inc. and Seabulk Petroleum
Transport, Inc. (collectively "Seabulk") also appeal. We find
that we have jurisdiction under the collateral order doctrine
over the district court’s ruling on the issue appealed by the
Coast Guard because it would bind the agency on remand. On
the merits, we hold that the district court erred in rejecting the
Coast Guard’s interpretation of its own regulations. We fur-
ther find that the district court erred in ordering Seabulk to
provide security during the course of these proceedings. The
judgment of the district court is therefore reversed and the
case remanded for further proceedings.

I.

In its role as the federal agency with the power to adminis-
ter the vessel documentation laws, the United States Coast
Guard regulates the issuance of certifications to vessels that
participate in nautical trade between points in the United
States, also known as coastwise trade. This responsibility
includes overseeing a network of intersecting federal statutes
that govern vessel specifications and safety and that also seek
to protect the economic interests of U.S. shipyards. The earli-
est statute on point, the Jones Act, was enacted in 1920 and
restricts the coastwise trade to vessels built in the United
States and owned by U.S. citizens. 46 U.S.C. § 55102 (for-
merly at 46 U.S.C. app. § 883). In 1956 and 1960, Congress
passed and then amended the Second Proviso to the Jones
Act, which was intended to shore up the Act’s protections for
U.S. shipyards. Pub. L. No. 84-714, 70 Stat. 544 (1956) (Sec-
ond Proviso) (currently codified as amended at 46 U.S.C.
§ 12132(b) and 46 U.S.C. § 12101(a)); Pub. L. No. 86-583, 74
Stat. 321 (1960) (amendment). The Jones Act and its Second
Proviso govern the Coast Guard’s issuance of certifications
that license vessels for coastwise trade ("coastwise endorse-
ments").

In addition to these general statutory provisions, the Oil
Pollution Act of 1990 ("OPA 90") provides that all oil tankers
 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD 5
in the coastwise trade must be equipped with double hulls by
a specified date. 46 U.S.C. § 3703a(a). Absent a double hull,
vessels are not eligible to operate in United States waters. 46
U.S.C. § 3703a(a)(2). Among the vessels that needed to be
brought into compliance with the requirements of OPA 90
was the Seabulk Trader ("the Trader"), a tanker owned by
Seabulk and used exclusively in the coastwise trade. In order
to conform to OPA 90, the Trader needed a double hull
installed, and Seabulk sought to conduct the work on the hull
in China. However, under federal law, in order to maintain a
coastwise endorsement a vessel must not be "rebuilt outside
the United States." 46 U.S.C. § 12132; 46 U.S.C. § 12101.
Pursuant to Coast Guard regulations, 46 C.F.R. § 67.177(g),
Seabulk submitted a request to the agency for a preliminary
determination of whether the work it proposed to undertake
on the Trader would constitute a foreign rebuilding and there-
fore disqualify the vessel from maintaining its coastwise
endorsement. Seabulk also requested a determination of
whether proposed alterations to the vessel’s ballast tanks
would violate the Port and Tanker Safety Act of 1978, 46
U.S.C. § 3704. Based upon the information Seabulk provided,
the Coast Guard issued a preliminary determination that the
work would not constitute a foreign rebuilding or a prohibited
foreign installation of required ballast tanks.

Following that issuance, the Trader did undergo work in
China, which consisted of the construction of an "internal
hull" that would provide the vessel with a full double hull and
reconfiguration of the vessel’s ballast tank system. In total,
the work constituted 8.15% of the Trader’s pre-modification
steelweight. J.A. at 233. After completion of the work, Sea-
bulk applied for and was granted a coastwise endorsement for
the Trader. J.A. at 30.

In considering whether the Trader could maintain its coast-
wise endorsement following the work on its hull, the Coast
Guard applied the federal regulation created to implement the
Second Proviso, 46 C.F.R. § 67.177. The regulation sets out
6 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD
a comprehensive scheme for determining whether work done
in a foreign shipyard constitutes a foreign rebuilding. Work
can constitute a foreign rebuild if it consists of either: (1) the
addition of a major component to a vessel’s hull (the "major
component test"); or (2) the construction of a considerable
part of the hull (the "considerable part test").

In applying the regulation, the Coast Guard determined
which test applied to the work done on the Trader by assess-
ing whether the added steel composed a separable component
before its addition, in which case it would be assessed under
the major component test, or was not a discrete separable
component, in which case it would be assessed under the con-
siderable part test. This parsing between separable and insepa-
rable additions ("the separable/inseparable distinction") was
therefore integral to the agency’s interpretation of both the
major component and the considerable part tests.

The Coast Guard concluded that while the work on the
Trader’s hull brought it under the auspices of the Jones Act,
the construction did not qualify as a foreign rebuild under the
applicable administrative regulations. Ruling that the installa-
tion of the inner hull on the Trader did not consist of the addi-
tion of a separable component, the Coast Guard assessed the
installation of the inner hull under the considerable part test.
Because the added portions of the hull did not exceed the 10%
threshold of added steelweight set forth in the administrative
regulation, 46 C.F.R. § 67.177(b), the Coast Guard deter-
mined that the Trader had not been rebuilt foreign and there-
fore could be issued a coastwise endorsement.

Appellees, the Shipbuilders Council of America
("Shipbuilders"), brought suit in the district court to challenge
the Coast Guard’s issuance of a coastwise endorsement to the
Trader. Shipbuilders contended that the tanker was no longer
eligible to operate in the coastwise trade because the work
done in the Chinese shipyards: (1) constituted a foreign
rebuild of the ship in violation of the Second Proviso of the
 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD 7
Jones Act, 46 U.S.C. § 12132(b); and (2) included a foreign
installation of segregated ballast tanks in violation of the Port
and Tanker Safety Act of 1978, 46 U.S.C. § 3704. Seabulk,
as the owner of the Trader, intervened in the district court
action.

In the district court, Shipbuilders challenged the Coast
Guard’s grant of the coastwise endorsement as arbitrary and
capricious, an abuse of discretion, and contrary to law under
the Administrative Procedure Act. 5 U.S.C. § 706. The Coast
Guard claimed that the district court had no jurisdiction over
the Jones Act claim because the language of the statute was
so broad as to preclude meaningful judicial review. The dis-
trict court disagreed, finding that the language of the Jones
Act did not preclude the court’s review. The district court
then addressed the two determinations by the Coast Guard:
(1) that the Trader was not rebuilt foreign; and (2) that it did
not improperly have segregated ballast tanks installed in a for-
eign shipyard.

The district court declined to give deference to the Coast
Guard’s stated rationale for not applying the major component
test to the work on the Trader, finding that deference was not
warranted because: (1) the analysis employed by the agency
was not grounded in the language of the statute; and (2) the
regulation merely restated the language of the statute and thus
the Coast Guard could not claim the greater deference usually
given to an agency interpreting its own regulations. Finding
that the Coast Guard’s interpretation of the major component
portion of the regulation was not persuasive, the district court
struck it down.

The district court did defer to the agency’s interpretation of
the considerable part test. However, it found the Coast
Guard’s application of its interpretation to the Trader to be
arbitrary and capricious. The district court determined that the
agency did not provide an adequate explanation for its finding
that the Trader was not rebuilt foreign under the considerable
8 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD
part test. The steelweight of the work performed meant that
whether the Trader was rebuilt foreign was a question left to
agency discretion, 46 C.F.R. § 67.177(b)(2), but the agency
provided no reasons for its ultimate conclusion.

The district court also considered the third question of
whether the agency’s ruling on the installation of the Trader’s
segregated ballast tanks should be upheld. Again declining to
defer to the agency, the district court concluded that the agen-
cy’s interpretation of the statute was inconsistent with the
plain language of the statute. However, that holding was not
dispositive, because the court also concluded that there was
insufficient evidence in the record concerning the actual work
on the Trader to allow for a determination of whether the
Coast Guard’s issuance of a coastwise endorsement could be
upheld. All three questions were therefore remanded back to
the agency for further proceedings.

In addition, the district court instructed the Coast Guard on
remand to revoke the Trader’s coastwise endorsement, citing
a lack of support for issuance of the endorsement in the
record. J.A. at 255. The revocation was based upon the district
court’s legal conclusions concerning the agency’s application
of the major component and considerable part tests, which are
necessary predicates to any analysis of the record.

Before conducting any further proceedings, the Coast
Guard appealed to this court. Seabulk, which had intervened
in the case below, also filed a notice of appeal.

II.

The initial question in this case concerns the scope of our
jurisdiction on appeal. Under federal law, an appellate court
may only review a "final order" of a lower court. 28 U.S.C.
§ 1291. However, the collateral order doctrine recognizes an
exception to § 1291’s final order limitation for certain deci-
sions of the district court that: "(i) conclusively determine the
 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD 9
disputed question; (ii) resolve an important issue completely
separate from the merits of the action; and (iii) [are] effec-
tively unreviewable on appeal from a final judgment." String-
fellow v. Concerned Neighbors in Action, 480 U.S. 370, 375
(1987) (quotations omitted). The circuits that have considered
the question have uniformly held that a decision of a district
court remanding a case to an agency for further consideration
does not qualify as an appealable collateral order. Occidental
Petroleum Corp. v. SEC, 873 F.2d 325, 329-30 (D.C. Cir.
1989) (collecting cases). However, most circuits have also
made an exception to this blanket rule when it is the federal
agency itself that brings an appeal. Courts permit the agency
to appeal because the agency is bound on remand by the stan-
dard articulated by the district court and so would not have a
chance to appeal from any further judgment, making the dis-
trict court’s determination effectively unreviewable by the
agency on remand. Id. at 330 (collecting cases).

This circuit has followed suit, reviewing collateral orders
that remand cases to agencies "if a district court order
remanding a case to an administrative agency will be effec-
tively unreviewable after a resolution of the merits." W. Va.
Highlands Conservancy, Inc. v. Norton, 343 F.3d 239, 244
(4th Cir. 2003) (quoting Hanauer v. Reich, 82 F.3d 1304,
1306-07 (4th Cir. 1996)); Colvin v. Sullivan, 939 F.2d 153,
155 (4th Cir. 1991) ("The district court’s remand order was a
final judgment, allowing appeal under 28 U.S.C. § 1291.").
Where a district court order would be effectively unreview-
able by an agency on remand, "the order is a final decision"
for purposes of § 1291. Norton, 343 F.3d at 244.

An agency’s appeal of a district court’s decision makes that
decision "final" for the purposes of § 1291 and permits a
reviewing court to properly exercise its jurisdiction over the
matter. In this case, Seabulk seeks to bring a broader chal-
lenge to the district court’s decisions, arguing that in addition
to the court’s holding on the major component test, we should
review: (1) the considerable part determination; (2) and the
10 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD
segregated ballast tank determination. The Coast Guard spe-
cifically does not challenge the district court’s rulings on
those points, having determined that such issues will be
addressed on remand to the agency. Appellant’s Br. at 8 n.3.
We find that review of those issues, not raised by the agency
or related to the agency’s appeal, exceeds the scope of our
jurisdiction under the collateral order doctrine.

Seabulk also raises a challenge to the revocation order
issued by the district court. Seabulk’s Br. at 3. This challenge
falls outside the limited scope of the agency’s appeal in this
case. The Coast Guard appeals only the district court’s ruling
that the agency improperly applied the "major component"
test in determining that the Trader was not rebuilt foreign. See
Appellant’s Br. at 3. The Coast Guard did not include the
revocation order in its Statement of the Issues on appeal,
Appellant’s Br. at 3, and therefore the agency has not properly
raised this issue before us.

We need not reach the question of whether such an order
could be appealed by a party other than the agency, because
the order itself is not final and therefore not properly subject
to review under the collateral order doctrine. Our precedent
indicates that, when the agency appeals, our jurisdiction
encompasses the district court’s determinations that are both
binding on the agency and would be essentially unreviewable
in a later court proceeding. Norton, 343 F.3d at 243-44 (hold-
ing that where the district court ruled on a decision of the
agency made as "the exercise, by delegation, of the [agency’s]
power," the entire decision was within the circuit court’s
jurisdiction upon appeal by the agency). The revocation order
is premised upon the district court’s finding that the agency
had not provided sufficient reasons to support its issuance of
a coastwise endorsement.1 Because the agency remains free to
1
We note that the district court’s revocation order was predicated upon
its now-reversed holding on the major component test. The district court
may therefore wish to reconsider that aspect of its order on remand, partic-
ularly in light of the language of 46 CFR § 67.173.
 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD 11
evaluate the Trader’s eligibility on remand using the correct
legal standard, the revocation order is not final and therefore
cannot be reviewed under § 1291.

III.

Under U.S. law, a vessel becomes ineligible for a coastwise
endorsement, and therefore ineligible to participate in the
coastwise trade, if significant work is performed on the vessel
in a foreign shipyard. The statute requires that when a ship is
rebuilt, "the entire rebuilding, including the construction of
any major component of the hull or superstructure, [be] done
in the United States." 46 U.S.C. § 12101. Construction that
violates this provision invalidates the vessel’s eligibility for a
coastwise endorsement because the vessel is no longer
deemed to have been built in the United States. See 46 U.S.C.
§ 12112(a).

Administrative regulations implementing the Jones Act
state that a vessel is "rebuilt foreign" when "any considerable
part of its hull . . . is built upon or substantially altered outside
of the United States." 46 C.F.R. § 67.177. This is assessed
under two tests set forth in the regulation. The "major compo-
nent" test qualifies a vessel as rebuilt foreign if "a major com-
ponent of the hull or superstructure not built in the United
States is added to the vessel." 46 C.F.R. § 67.177(a). The
"considerable part" test qualifies a vessel as rebuilt foreign if
the work performed abroad "constitutes more than 10 percent
of the vessel’s . . . discounted lightship weight." 46 C.F.R.
§ 67.177(b)(1). A vessel may, but need not, be deemed rebuilt
foreign by the agency if the work constitutes between 7.5 and
10% of the discounted lightship weight. 46 C.F.R.
§ 67.177(b)(2).

In its analysis, the Coast Guard ruled that the work done on
the Trader should not be evaluated under the major compo-
nent test because the installation of the steel to form the inner
hull did not constitute a separable major component of the
12 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD
ship. Analyzing the work under the considerable part provi-
sion of its regulation, the agency found that the Trader was
not rebuilt foreign under 46 U.S.C. § 12101 and was thus enti-
tled to retain its coastwise endorsement. The district court, in
assessing the Coast Guard’s determination, accorded the
agency’s interpretation of the implementing regulation only
Skidmore deference. This standard gives "respect" to an
agency determination where the form and content of the rul-
ing gives it "power to persuade." Skidmore v. Swift & Co.,
323 U.S. 134, 140 (1944). Finding the reasoning unpersua-
sive, the district court declined to uphold the agency’s inter-
pretation as a permissible construction of the regulations
implementing the Jones Act. Because we find that the district
court erred in its application of the Skidmore standard, we
reverse its holding on this point.

A.

For purposes of our review, when agency action is at issue,
"we generally review the agency’s action from the same posi-
tion as that of the district court." Fisherman’s Dock Co-op,
Inc. v. Brown, 75 F.3d 164, 168 (4th Cir. 1996). In this case,
we therefore apply the Administrative Procedure Act ("APA")
"and seek to determine, as did the district court, whether on
the administrative record the agency action was" in violation
of the APA’s provisions. Id.

The district court found that the Coast Guard’s interpreta-
tion of the "major component" provision, holding that it
applied only to separable components, was offered only in
informal opinion letters. Because the district court held that
the separable/inseparable distinction was not present in either
the statutory language or the administrative regulations, it
accorded only Skidmore deference to the agency’s interpreta-
tion. J.A. at 240-41. Under the Skidmore standard, the court
defers to an agency interpretation only if and to the extent that
it is persuasive. Skidmore, 323 U.S. at 140. The district court
found that the Coast Guard’s interpretation had "no founda-
 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD 13
tion in [the] statute or regulation," J.A. at 242, nor in the leg-
islative history or purpose, J.A. at 243-44, and it therefore
declined to find the agency’s construction persuasive. Instead,
the district court invalidated the Coast Guard’s determination
under the major component test and remanded the issue to the
agency. J.A. at 245.

On appeal the Coast Guard argues that its determination
that the work on the Trader did not fall under the major com-
ponent provision of the administrative regulations is entitled
to deference under Chevron U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837 (1984). Under Chevron,
where a statute is "silent or ambiguous with respect to the spe-
cific issue," reviewing courts defer to the administering agen-
cy’s interpretation so long as it "is based on a permissible
construction of the statute." Id. at 843. The agency bases this
argument on the delegation provisions contained within the
Jones Act and the Vessel Documentation Act. Appellant’s Br.
at 28 (citing Pub. L. No. 84-714, 1956 U.S.C.C.A.N. 622;
Pub. L. No. 96-594, 94 Stat. 3453 (1980)). Therefore, the
Coast Guard argues that its regulations interpreting the lan-
guage of the Jones Act and its determinations pursuant to
those regulations should be upheld unless they are found to be
unreasonable. Appellant’s Br. at 31. The agency contends that
its interpretation of a "major component" as one that is built
separate from the vessel not only more closely aligns with the
legislative history of the Jones Act, but also preserves the
integrity of the considerable part test, which would otherwise
be conflated with the major component analysis. Id. at 31-38.
Shipbuilders contends that the agency’s definition of a major
component was post hoc, offered only for litigation purposes,
and therefore not entitled to deference. Appellee’s Br. at 25.

In the alternative, the Coast Guard argues that its interpreta-
tion of the regulation is entitled to deference under the stan-
dard established in Auer v. Robbins, 519 U.S. 452, 461
(1997). Under Auer deference,2 an agency’s interpretation of
2
This type of review of agency action is also sometimes referred to as
Seminole Rock deference. Both terms denote the same level of deference
and are applied in precisely the same circumstances.
14 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD
its own regulation is "controlling unless plainly erroneous or
inconsistent with the regulation." Auer v. Robbins, 519 U.S.
452, 461 (1997); accord Bowles v. Seminole Rock & Sand
Co., 325 U.S. 410, 413-14 (1945) ("[T]he ultimate criterion is
the administrative interpretation, which becomes of control-
ling weight unless it is plainly erroneous or inconsistent with
the regulation."); see Christensen, 529 U.S. at 587-88
(explaining that Chevron deference applies to an agency’s
interpretation of a statute while Auer deference applies to "an
agency’s interpretation of its own regulation"); see also
United States v. Deaton, 322 F.3d 698, 708-09 (4th Cir. 2003)
(applying Chevron deference to the agency’s construction of
the statute in question and Auer deference to its interpretation
of the regulation issued pursuant to that statute); cf. Human-
oids Group v. Rogan, 375 F.3d 301, 306 (4th Cir. 2004)
("[A]gency interpretations that lack the force of law (such as
those embodied in opinion letters and policy statements) do
not warrant Chevron-style deference when they interpret
ambiguous statutes but do receive deference under Auer when
interpreting ambiguous regulations." (quoting Akzo Nobel
Salt, Inc. v. Fed. Mine Safety & Health Review Comm’n, 212
F.3d 1301, 1304 (D.C. Cir. 2000))).

The district court declined to give Auer deference to the
agency’s interpretation because it found that the language of
the Coast Guard regulation that established the "major com-
ponent" test constituted a "parroting regulation." The Supreme
Court established in Gonzales v. Oregon, 546 U.S. 243
(2006), that when a regulation merely "parrots" the language
of the statute it implements, it does not reflect "the consider-
able experience and expertise the [agency has] acquired over
time with respect to the complexities of the" statutory scheme
and is not entitled to Auer deference. Id. at 256; see also id.
at 257 (holding that when "the underlying regulation does lit-
tle more than restate the terms of the statute itself," the gov-
ernment is not entitled to Auer deference because of "the near
equivalence of the statute and regulation").
 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD 15
In this case, because we find that the district court erred in
its application of the Skidmore standard, we need not reach
the question of whether the major component language of the
regulation merely parrots the language of the Jones Act. See,
e.g., Fed. Express. Corp. v. Holowecki, 128 S. Ct. 1147, 1156
(2008) (declining to decide whether Auer or Chevron defer-
ence applies to an agency’s "construction of the statutory
term" where the agency’s interpretation is persuasive even
absent such deference); Encarnacion ex rel. George v. Astrue,
568 F.3d 72, 79 (2nd Cir. 2009) (same). We turn now to our
analysis of the district court’s application of Skidmore.

B.

Under the regulation, any "vessel is deemed rebuilt foreign
when . . . a major component of the hull or superstructure not
built in the United States is added to the vessel." 46 C.F.R.
§ 67.177(a). The major component test therefore applies to all
ships, regardless of their material of construction, when "a
major component" is added to the hull. For ships constructed
of steel or aluminum, as the Trader is, there is a second test
in the regulation. The "considerable part" test qualifies a ves-
sel as rebuilt foreign if the work performed abroad "consti-
tutes more than 10 percent of the vessel’s . . . discounted
lightship weight." 46 C.F.R. § 67.177(b)(1). The agency has
discretion to determine whether a vessel has been rebuilt for-
eign where the work constitutes between 7.5 and 10% of the
discounted lightship weight. 46 C.F.R. § 67.177(b)(2).

The Coast Guard argues that the major component test and
the considerable part test apply in different circumstances.
Under the agency’s reading, the addition of a major compo-
nent, which component is not built in the United States, auto-
matically results in the revocation of a ship’s coastwise
endorsement. A major component, in turn, is defined by the
agency as any "new, separate and completely-constructed
unit" weighing more than 1.5% of the vessel’s steelweight.
Appellant’s Br. at 32. Any other work—any work, that is, that
16 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD
does not involve the addition of a separable major component
not built in the United States—is assessed under the consider-
able part test. Appellant’s Br. at 25-26. Because the inner hull
of the Trader was installed piece by piece and therefore was
not a "new, separate and completely-constructed unit," the
Coast Guard evaluated it under the considerable part test.

Shipbuilders moved for summary judgment in the district
court, arguing that the Coast Guard’s interpretation of the reg-
ulation was invalid. The district court evaluated the major
component and the considerable part tests separately, and
invalidated the Coast Guard’s interpretation of each. On
appeal, we review the district court’s grant of summary judg-
ment de novo. Meson v. GATX Tech. Servs. Corp., 507 F.3d
803, 806 (4th Cir. 2007).

The district court evaluated the agency’s proffered interpre-
tation and found that it was not persuasive because it relied
on the distinction between separable and inseparable parts to
define the work that would be assessed under the major com-
ponent test. Concluding that the question of whether an added
part is a separable component had no basis in the statutory
text or legislative history and that the Coast Guard’s interpre-
tation would lead to arbitrary application of the regulations,
the district court held that the agency had not properly inter-
preted the major component test.

In its appeal, the Coast Guard persuasively argues that the
separable/inseparable distinction is a necessary part of its
holistic interpretation of the regulation. Only by drawing a
firm line between work that is to be assessed under the major
component test and work that is to be evaluated using the con-
siderable part test, the agency contends, can both prongs of
the regulation be given effect.

The considerable part test was first articulated in regula-
tions promulgated the year following the Jones Act’s Second
Proviso. See 22 Fed. Reg. 6380, 6381 (1957) ("A vessel may
 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD 17
be deemed to have been rebuilt if any considerable part of the
hull in its intact condition . . . is built upon or substantially
altered."); Am. Haw. Cruises, 713 F. Supp. at 462-63 (noting
that the use of the "considerable part" standard to interpret
"rebuilt" has its origins in the decision in The Grace Mead, 25
F. Cas. 1387 (E.D. Va. 1876)). The considerable part test
therefore predates the major component test; the latter was
added to the regulation following a 1960 Congressional
amendment of the Jones Act. See H. R. Rep. No. 86-1887
(1960), reprinted in 1960 U.S.C.C.A.N. 2664, 2664-66 (citing
the need to close "a loophole" in the Jones Act’s protectionist
provisions that excerpted from coverage as rebuilt work
where "vessel hull or superstructure sections [were] con-
structed abroad" but installed in U.S. shipyards); 25 Fed. Reg.
13687, 13687-88 (1960) (amending the regulation so that, in
addition to the considerable part test, found in 19 C.F.R.
§ 3.28(a), it contains in 19 C.F.R. § 3.28(b) language that also
makes "the addition or change in any major component of the
hull or superstructure . . . not constructed in the United States"
a prohibited rebuilding). The two provisions therefore func-
tion together to create the regulatory scheme that Congress
intended to enforce the Second Proviso to the Jones Act.

In its brief and at oral argument, Shipbuilders contends that
a proper interpretation of the regulation would bring all work
exceeding 1.5% of the vessel’s steelweight under the major
component test. Appellee’s Br. at 38-39. Under this interpre-
tation, separable and inseparable components would be
assessed identically and a "major component" would include
any work on the vessel in excess of minimal maintenance.

The difficulty with the interpretation that Shipbuilders
advances is that it eviscerates the considerable part test. In
interpreting statutes and regulations, we have a duty, where
possible, "to give effect" to all operative portions of the
enacted language, including its "every clause and word." Dun-
can v. Walker, 533 U.S. 167, 174 (2001) (quotations omitted);
accord Hibbs v. Winn, 542 U.S. 88, 101 (2004) (citing "the
18 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD
rule against superfluities," which holds that "[a] statute should
be construed so that effect is given to all its provisions, so that
no part will be inoperative or superfluous, void or insignifi-
cant") (quotations omitted); see also Zheng v. Holder, 562
F.3d 647, 654 (4th Cir. 2009) (deferring to an agency’s "rea-
sonable interpretation" of statutes and regulations where the
petitioner’s proposed alternative would render provisions "su-
perfluous"); U.S. ex rel Sanders v. N. Am. Bus Indus., Inc.,
546 F.3d 288, 295 (4th Cir. 2008) (citing Duncan). In assess-
ing the Coast Guard’s interpretation, we therefore note that its
interpretive scheme has the great virtue of construing each
provision of the regulation to have functional significance.3

The district court placed a great deal of emphasis on the
fact that the separable/inseparable distinction is not found in
the text of either the regulation or the statute. However, this
does not deprive the interpretation of its persuasive power in
instances where the language of the regulation is ambiguous.
See Barnhart v. Walton, 535 U.S. 212, 221 (2002) ("[T]he
fact that the Agency previously reached its interpretation
through means less formal than ‘notice and comment’ rule-
making . . . does not automatically deprive that interpretation
of the judicial deference otherwise its due."). In this case, the
language of the regulation does not, in itself, provide clear
guidance on how to determine in a given instance whether the
major component test or the considerable part test should be
applied. However, the Coast Guard is the interpretive body
best positioned to take account of the myriad factors involved
in arriving at a reasonable construction of the complex regula-
tory scheme for coastwise endorsements; and its interpretation
offers a way to harmonize the regulation so that each provi-
3
Because the statute of limitations for such an action has passed, no
facial challenge to the language of the regulation itself can be raised. See
28 U.S.C. § 2401(a) (imposing a six-year statute of limitation on claims
against the United States). This gives added heft to the mandate that a
valid interpretation must not make superfluous either test but embrace
both portions of the regulation as written.
 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD 19
sion has independent significance. See United States v. Mead
Corp., 533 U.S. 218, 234 (2001) ("Skidmore . . . hold[s] that
an agency’s interpretation may merit some deference what-
ever its form, given the specialized experience and broader
investigations and information available to the agency . . . and
given the value of uniformity in its administrative and judicial
understandings of what a national law requires.") (citations
and quotations omitted).

Nevertheless, the agency does not have unfettered interpre-
tive license. Some indicia of reliability and reasonableness
must exist in order for us to defer to the agency’s interpreta-
tion. See Am. Haw. Cruises, 713 F. Supp. at 466 (listing such
indicia as whether "the administrative determination was
made contemporaneously with the statute, is longstanding,
and has been applied consistently") (citations and quotations
omitted). The Coast Guard argues that its analysis in this case
meets this requirement, citing the legislative history of the
Jones Act and longstanding agency practice. Appellant’s Br.
at 33.

We agree. The agency’s interpretation offers a holistic
vision of the regulation that gives effect to each of its provi-
sions, and Coast Guard’s interpretation comports with the
plain language of the regulatory and statutory schemes. The
interpretation is longstanding, has been consistently applied in
the same manner, and comports with the congressional intent
of the governing statute. See J.A. at 150, 159, 183-85, 202
(Coast Guard opinion letters articulating a similar vision of
the major component test); Am. Haw. Cruises, 713 F. Supp.
at 462-64 (reviewing the legislative history of the Second Pro-
viso and finding that Congress purposefully left the interpreta-
tion of the term "rebuilt" to the administering agency).
Therefore, we find that the district court erred in failing to
defer to the agency’s persuasive interpretation of the major
component test.
20 SHIPBUILDERS COUNCIL v. U.S. COAST GUARD
IV.

In order to allow Seabulk to continue to employ the Trader
in the coastwise trade during the pendency of this appeal, the
district court stayed its order pending appeal. In so doing, it
required that Seabulk "provide an undertaking to pay to [Ship-
builders] 12.5% of the net revenue realized from the Seabulk
Trader’s operations in coastwise trade" if the judgment was
affirmed on appeal. Seabulk moved in this court to have the
security requirement invalidated, and we held over consider-
ation of that motion until the resolution of the case. As part
of the disposition of this case, we hereby release Seabulk
from any such undertaking with regard to Shipbuilders.

V.

For the foregoing reasons, the judgment of the district court
invalidating the Coast Guard’s interpretation of the major
component test of 46 C.F.R. § 67.177 is reversed. The district
court order instructing Seabulk to provide an undertaking to
pay Shipbuilders is also reversed. The case is remanded to the
district court, with instructions to modify its remand order as
discussed and to remand to the agency for further proceedings
consistent with this opinion.

REVERSED AND REMANDED