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Intermodal Tariffs: A Problem of Conlficting Jurisdiictions

by Gregory J. Tarone on Jan. 30, 2014

Industry Specialties Transportation & Shipping Business  Administrative Law Government  Government Agencies 

Summary: The shipment of goods in containers has revolutionized the ocean shipping industry.

Introduction:

    The shipment of goods in containers has revolutionized the ocean shipping industry. Although containerization requires a large initial capital investments, it offers a more efficient and thus a more economical method for the international transportation of most goods, since transportation is a substantial element of cost in trade among nations,a  reduction of shipping costs should stimulate foreign trade. in addition the combination of reduced costs and more efficient service should improve the competitive posture of U.S. exporters in overseas markets and reduce the costs of U.S. imports.

    A wide range of cargo is now being containerized and containerships and other specialized carriers capable of handling containers are rapidly replacing the standard break-bulk carriers; the use of containers in new jumbo jets also has had beneficial effects on the air transportation industry. Over 40 percent of all U.S. commercial cargo were transported in containers during 1974, as compared to 34 percent in 1973 and 27 percent in 1972. the total amount of cargo transported in containers in the foreign total amount of cargo transported in containers in the foreign commerce of the United States during 1974 was 21 million tons, an increase of 19 percent over 1973 levels and 72 percent over 1972 levels/  Since its inception in 1957, “[t]he simple technique of containerization has caused the most significant technique of change in the international transportation of property since the steam engine replaced the sail”

    When the containers are shipped between points in foreign countries and inland points in the United States, two or more modes of transportation - ship, rail, truck, or airplane -are usually combined to complete the movement.  The container can be transported from the shipper’s door to the receiver's door in one bow without being opened or re handled by stevedores. This coordinated manner of transportation is referred to as a “through route” or “intermodal service” the rate charged for a through route shipment is a “through rate,” which, when combined with other factors, forms an “intermodal tariff.” An intermodal tariff, therefore, may contain “a single rate for combined carriage of goods by two or more modes” of transportation.

    The U.S. carriers involved in the different modes of transportation are regulated by one of three administrative agencies: the Federal Maritime Commission (FMC), the interstate Commerce Commission (ICC), or the Civil Aeronautics Board (CAB). As a result, an international intermodal tariff is “Subject to the mutually exclusive yet concurrent jurisdiction of two or more agencies.  Each agency's individual jurisdiction is limited by the stature to certain types of transportation; its power varies on each leg of the intermodal movement. AS a result conflicts arise between agencies concerning their different tests for the determination of a reasonableness of rates, standards of unlawful discrimination (among shippers, carriers,m or localities), and regulation or non-regulation of rate divisions. these conflicts have created difficulties for us carriers, causing some to doubt whether American shippers are fully able to compete in world trade.

    intermodal service in international commerce presents other problems, including diversion of cargo by port equalization in minibridge tariffs, labor disputes, relocation of ports, taxation, and the questions of single carrier and insure liability. This Note, however, will discuss only the efforts of administrative agencies and congress to regulate intermodal tariff, and will focus on  the conflict of regulatory jurisdictions among the agencies. Furthermore, while it is possible that U.S. carriers will join the foreign carriers in establishing the intermodal tariffs, this Note will discuss only those international intermodal tariffs established by carriers operating under U.S. jurisdiction.

    When Congress established the FMC, the ICC, and the CAB, modern container technology neither existed nor was seriously contemplates; the inter-agency relationships created by international intermodal tariffs were not foreseen.  By the nature of an intermodal tariff, “any one of two more agencies involved which objects to the rate portion subject to its regulatory jurisdiction can hold unlawful that portion and destroy the entire rate.” Since an  intermodal tariff encompasses the regulatory jurisdictions of two or more of these agencies, the issue arises as to which agency, if any has jurisdiction over the single rate contained in the tariff.  This issue has been a subject of dispute between FMC and the ICC.



Ex Parte 261: The FMC and the ICC

    In an effort to facilitate intermodal transportation and the development of international trade, the ICC instituted rule making proceedings on July 31, 1969, which substituted formal regulations for the informal guidelines and special permission orders then being used for filing intermodal tariffs. On September 4, 1970, the ICC issued its first report in Ex Parte 261, authorizing intermodal tariffs between ICC and FMC carriers under the exclusive jurisdiction of the ICC. Upon reconsideration, however, the ICC realized that at that time it did not possess sufficient experience to prescribe general rules for the ICC-FMC combined carrier intermodal tariffs.

    On August 12, 1974, the ICC promulgated its first formal regulations governing intermodal tariffs. the regulations reaffirmed the ICC’s authority to suspend an entire intermodal tariff by objecting to the rate portion accruing to the ICC carrier, and perceived substantive rules applying to ICC and FMC shipper allowances and currency surcharges. The regulations specifically excluded the FMC non-vessel operating common carriers by water (NVOs) from participation in these tariffs.

    On July 27, 1975, the ICC issued its fourth report, in which rules and regulations were provided for filing of the intermodal tariffs by rail, motor, and water carriers subject to ICC jurisdiction and by vessel-operating common carriers by water subject to FMC jurisdiction. IN this last proceeding, the ICC also instituted a separate proceeding for ICC-regulated freight forwarders and FMC-regulated NVOs to consider their participation in intermodal tariffs.  The effect of the ICC’s report and order in Ex Parte 261 was to place ICC and FMC carriers under the exclusive jurisdiction of the ICC when entering into intermodal tariffs between inland points in the United States and points in foreign countries. Upon petitions by the FMC and various private shipping companies the ICC reconsidered this report. The FMC objected to the ICC’s fourth report and order in Ex Parte 261, claiming that the ICC had exceeded its regulatory jurisdiction ie. that it had materially affected shipping in foreign trade by subjecting the ocean portion of intermodal tariffs to its regulation without gaining the approval of either the FMC or the president, as required by the statute. The FMC also requested the ICC to stat its offer in Ex Parte 261. When the IVV neither honored nor responded to the FMC’s request, the FMC sought to prevent implementation of Ex Parte 261 in three ways: (1) it petitioned the U.S. Court of Appeals for the District of Columbia Circuit for judicial review, temporary stat and interlocutory injunction of the ICC’s rules; (2) it made an unprecedented appeal for presidential intervention to suspend, modify or annul the ICC’s rules invalid.  Before the court of appeals for the president could take any action, the ICC itself stayed the effective date of Ex Parte 261

On January 30, 1976, the ICC decided yet another Supplemental Report and Order in Ex Parte 261. In this last report, the ICC emphasized that it will invoke its substantive and procedural jurisdiction solely over the domestic carriers portion of an intermodal tariff. The Supplemental Report also provided that challenges to the lawfulness of rates in an intermodal tariff will not be entertained by the ICC unless directed to the portion of the rate accruing to the domestic carrier under provisions of    the Interstate Commerce Act.  The FMC will be left to determine the lawfulness of the rate portion of the intermodal tariff accruing to carriers under its jurisdiction.  Technically, therefore, the ICC no longer claims suspension power over either portion of the tariff will effectively destroy the tariff.

The Supplemental Report, which became effective on March 15th, 1976, permits ICC and FMC carriers to file intermodal tariffs subject to certain rules and regulations. The ICC will relax its tariff publishing regulations whenever possible to permit ocean carriers to publish their tariffs in accord with FMC regulations, but will still require ICC carriers to abide by the ICC’s regulatory provisions. Similarly, the ICC will not require the FMC carrier to state its portion of an intermodal tariff in U.S. currency, but will require this of a carrier subject to ICC regulatory jurisdiction. The Supplemental report requires that tariffs filed with the ICC be submitted in writing and not and not by telegraph, cable, or other temporary means, and that they be printed in English, even though the FMC will allow them to be filed in a foreign language under certain circumstances. Furthermore, the ICC requires that FMC ocean carriers file tariffs to U.S. jurisdiction regardless of their nationality, a result different from that of a normal transportation contract situation.

    On June 25, 1976 the Commonwealth of Pennsylvania and seven other parties petitioned the Court of Appeals for the district of Columbia Circuit to review the final decision of the ICC in Ex Parte 261.  The position of the petitioners is that the ICC has neither the statutory authority or regulate joint rates in intermodal tariffs between ICC and FMC carriers, nor the authority to suspend an entire rate by holding unlawful that portion accruing to the ICC carrier. The relief requested is permanent injunction of the ICC’s rules in Ex Parte 261 insofar as they permit the filing and regulation of intermodal tariffs for service between the United States and non-adjacent foreign countries.


The CAB


Air Carriers have not been as involved in international intermodal service as ICC and FMC carriers, but there has been an appreciable increase in the transport of containers by air. At this time, there are no apparent difficulties involved for a CAB-regulated direct air carrier filing an intermodal tariff with the ICC; section 1003 of the Federal Aviation Act of 1958 expressly authorizes the joint entry of CAB and ICC carriers into intermodal tariffs. Section 1003 holds the carriers involved responsible for establishing just and reasonable rates, rate divisions, and related practice in providing intermodal service. it also precludes air carriers not directly engaged in operating in the transportation of property, except air express companies, from filing intermodal tariffs. The carriers thus excluded are principally air freight forwarders.

    Section 1003 also provides for a joint board, composed of equal representation from the CAB and ICC, to pass upon matters concerning the filling of intermodal tariffs by the air carriers subject to CAB jurisdiction and common carriers subject to ICC jurisdiction. As yet, there has been no occasion to convene such a board for formal proceedings. In fact, intermodal tariffs filed by CAB and ICC carriers are approves as a matter of routing.  Nevertheless, given the similarity of the CAB and ICC approaches to intermodal tariffs, conflicts similar to those experienced between the FMC and ICC could arise if ocean-air intermodal service becomes popular



Ex Parte 261 (Sub-No. 1) : The Freight Forwarders

    The FMC’s rule concerning intermodal tariffs contemplates NVO participation in these tariffs, but the ICC’s Ex Parte 261 does not allow it.  The ICC did not consider the matter of NVO’s in Ex Parte 261 because it did not find that refusal to allow them participation in intermodal tariffs would cause irreparable injury.  The issue is now being examined in Ex Parte 261  (Sub-no. 1)

    Both NVOs and ICC freight forwarders purchase underlying transportation from vessel operations. While both NVOs and freight forwarders are consolidators, NVOs are generally distinguishable in that they are also coordinators, NVOs normally arrange for an exporters transportation of cargo by an ocean carrier at a U.S. port; ICC freight forwarders arrange for the movement of cargo to and from interior domestic points, and either consolidate less than carload shipments into carload lots or break bulk shipments for distribution to different inland destinations.

    The NVO services offer potential advantages to shippers, especially small shippers, because NVOs- like ocean freight forwarders- arrange for the receipt, consolidation, documentation, and transportation of intermodal movements. The industry claims that this service offers exporters savings that would eliminate the competitive advantage held by European exporters who enjoy intermodal tariffs. NVOs participate in domestic offshore intermodal tariffs, and the FMC recognizes NVOs in foreign commerce, so the NVO industry views the ICC’s exclusion of their participation in Ex Parte 261 intermodal tariffs as a usurpation of FMC jurisdiction.

    Under Ex Parte 261, neither the ICC freight forwarders nor FMC NVOs can file intermodal tariffs encompassing carriers from other modes. However, certain other companies- the freight forwarding transportation companies- may be authorized to operate both as ICC freight forwarders and as FMC NVOs.  Though such companies cannot file international intermodal tariffs, they can effect the same result by quoting separate rates for the land and water portions of the movement, and filing each portion with the respective regulatory agencies involved.  Although there are a small number of transportation companies that offer this type of service, the ICC apparently favors the more liberal approach of issuing land-forwarder permits to NVO companies when a coordinated intermodal operation will be achieved; the same is true for air freight forwarding companies seeking an integrated intermodal operation.

    The general exclusion of NVOs from Ex Parte 261 regulations is currently being challenged in court. When the FMC petitioned the Court of Appeals for the District of Columbia to enjoin the effectiveness of the Ex Parte 261 IML Freight, Inc. (IML), an FMC-regulated NVO, intervened.  Upon the dismissal of the FMC;s case, IML’s suit was served and stayed pending the ICC decision concerning NVOs in Ex Parte 261. IML’s position is that NVOs were unlawfully excluded from participation in the Ex Parte 261 rule making proceeding because NVO’s are “interested persons” within the meaning of the Administrative Procedure Act, and because the OCC has no rational basis for distinguishing among classes of carriers which can participate in such rule makings.  The ICC’s position in the case is that NCVOs have not been denied the opportunity to participate in the rule making process, but rather are being given such opportunity in Ex Parte 261 The ICC therefore considers IML’s suit not ripe for judicial review because Ex Parte 261 has not yet been decided. IML argues that the ICC’s procedures in Ex Parte 261 were unlawful and that this procedural issue, not the substance is of NVO participation in intermodal tariffs, is ripe for judicial review. The relief sought by IML in this case is the setting aside of the ICC’s order in Ex Parte 261 and remand to the ICC with specific directions to include NVOs in the re-instituted proceeding



Congressional Action

The regulation of intermodal tariffs first became a legislative issue 12 years ago.  Between 1965 and the present, there has been a host of legislation introduced in both the House and the Senate dealing with intermodal transportation. Hearings have been heard on some of these bills, one during the 93rd Congress and two during the 94th Congress, but none of the bills has ever gone beyond the committee level.

    Before discussing the most recent bills on which Congress has held hearings, it should be noted that rule making by the administrative agencies cannot resolve all jurisdictional conflicts regarding intermodal tariffs. Action by Congress will be required to resolve conflicts of regulatory jurisdiction that agencies cannot manage or are not authorized to resolve through rule making. One problem that only Congress can resolve is that of antitrust immunity.


Antitrust Immunity

    The ICC, FMC, and CAB are presently permitted to confer antitrust immunity on carriers which operate under their respective jurisdictions and which participate in rate conferences or rate bureaus.  Under these agencies statuses however, antitrust immunity for tare conferences or rate bureaus cannot reach beyond the regulatory jurisdiction of each agency, nor can it be conferred by inter-agency conference agreement.  Carriers in different modes “can negotiate on a carrier-to-carrier basis, but antitrust immunity enjoyed by the modes separately does not extend to conference-to-conference negotiations.” The question of which agency’s antitrust immunity attaches to a particular intermodal tariff is complicated by jurisdictional conflicts not only among agencies but also among the congressional committees that oversee carrier operations.   


H.R. 1069
    H.R. 1069 which is identical to H.R. 12429 introduced in the 93rd Congress, would amend sections 2 and 3 of the Inter coastal Shipping Act of 1933 to include both inland and water portions of an intermodal movement. The bill also would amend the following sections of the Shipping Act of 1916: section 1, to include intermodal carriers other than NVOs in the term “common carriers by water”; section 15, to permit application of antitrust immunity to intermodal tariffs; section 18, to permit a through bill of lading and allow the intermodal carrier to assume liability for an entire intermodal movement, and section 33 to place FMC, leaving other carriers subject to the regulatory jurisdiction of the agency under which they operate with which they file their intermodal tariffs.  H.R. 1069 would eliminate the requirement that FMC intermodal carriers also file tariffs with the ICC and the CAB for the proportion of transportation which would normally come under those agencies regulatory jurisdiction

    This bill has been roundly criticizes in the past. The FMC, or course, supported the bill when it was introduced as H.R. 12429 in the 93rd Congress, but the bill was opposed by the ICC, the Department of Transportation (DOT) and even by private industry.  The CAB opposed the legislation because it thought that FMC carriers were not given an equal opportunity to become intermodal carriers.  The Justice Department opposed the legislation because of the extension of antitrust immunity. Indeed, this Bill met so much opposition during hearings in the 93rd Congress that no hearings were heard nor any other action taken when it was reintroduced as H.R. 1069 in the 94th Congress. The possibility that the bill will be reintroduced and passed in the 95th Congress is remote, at best.


H.R. 1080

    Section 1 of H.R. 1080, which is identical to H.R. 12428 introduced in the 93rd Congress, would amend section 15 of the Shipping Act of 1916 to extend antitrust immunity to negotiations between FMC ocean conferences and ICC and CAB rate  bureaus, and to allow carriers to file with the FMC and intermodal tariff containing a single factor rate for the entire intermodal movement. Section 2 of the bill would direct the FMC, ICC, and CAB, within 6 months of the bill’s enactment to promulgate uniform rules and regulations governing the content, format, and filing of intermodal tariffs.

    On September 15th 1976, the Subcommittee on Merchant Marine of the House Committee on the Merchant Marine and Fisheries held hearings on H.R. 1080.  The Justice Department opposed section 1 of the bill because extension of antitrust immunity woulds be a “serious departure from a fundamental economic  of promoting competition” and because proponents of the bill has not demonstrated that the detrimental effect on competition would be small enough to escape the public policy considerations of antitrust laws.  The Justice Department foresees no deterioration of the conference systems stability in the absence of an extension of antitrust immunity.  It considers section 1 to be an extension of antitrust immunity. It considers section 1 to be an extension of this groups control over internationalism which ultimately will cause higher rates for the least progressive conference firms.  The chief counsel for the committee, however, pointed out that despite the development of containerization and internationalism, U.S. carriers are becoming less than competitive with the carriers of those countries which have copied U.S. technology, because of cost differentials and limitations in bargaining power.

    The Justice Department favored section 2 of the bill because there seemed to be clear evidence that the jurisdictional conflicts facing intermodal traffic to move through Canada rather than through the United States.  The Ford Administration strongly supported the Justice Department’s position.

    The FMC supported section 1 of H.R. 1080, but wanted it amended to make it absolutely clear that antitrust immunity would apply “ to concerted activities between groups of carriers by water and groups of carriers in other modes with which they connect.” The FMC believes section 2 of the bill did not solve the jurisdictional conflicts of the agencies’ regulatory statutes, even though it would be a step in the right direction. The FMC also thought it would be better to have a single agency regulate intermodal movements. The shortcoming of H.R. 1080, according to the FMC, was its lack of provisions for a through bill of lading and for single-carrier liability.

    The ICC did not appear to be at the hearings on H.R. 1080, but it issued a letter to the subcommittee stating its opposition to the legislation. The ICC supported only section 3 of the bill, which required the FMC, ICC, and CAB to report to Congress within 1 year on the need for additional legislation to facilitate the development of intermodal transportation and to resolve any further jurisdictional conflicts. The ICC’s position was based of its rule making in Ex Parte 261, which it considered a workable mechanism for establishing intermodal tariffs between the ICC and the FMC.  With more than 150 intermodal tariffs on file with the ICC, and the number growing, the ICC nevertheless thought that the problem was not “so great as to justify a major revision of the regulatory structure.” the ICC considers the Integrity Committee on Intermodal Cargo, composed of representatives of the ICC, FMC, CAB and DOT, to be an adequate forum for the resolution of intermodal tariff problems.

    The General Electric Company supported H.R. 1080, but objected to the exclusion of NVOs from the benefits of the bill.  It maintained that NVOs provided not only valuable assistance to all shippers, but also the opportunity for exporters to compete effectively in the world marketplace; the company pointed out that the NVOs’ European counterparts, the Combined transport Operators, presently have the advantage of a through bill of landing not available to American NVOs.  It was GE’s view that the agency most involved in international intermodal commerce should be included, since, unlike steamship operators, NVOs have the option of shipping cargo with the best vessel at the earliest time, and therefore can increase the efficiency of an intermodal movement.

    The American Importers Association and the National Customs Brokers and Forwarders Association of America took the same position as General Electric. The Brokers and Forwarders thought that exclusion of NVOs would give the vessel operators a competitive disadvantage. According to the Brokers and Forwarders, the reason steamship lines opposed inclusion was an unjustifiable fear that the NVOs would build up such a large volume of traffic that they would be able to tell the steamship lines how to run their ships.  It is questionable whether the NVOs would ever have that ability; the Brokers and Forwarders were merely seeking to be treated equally with the steamship lines under H.R. 1080.  This would allow them to extend their business inland to new ports that are now springing up.



S. 2086

By request of the ICC, S 2086 was introduces in the 94th Congress to amend section 261(c) of the Interstate Commerce Act to permit carriers currently under ICC or FMC regulatory jurisdiction, including NVOs, to file intermodal tariffs with the ICC. In addition, the bill would amend section 216(e) to give the IC authority to order intermodal routes, decide the lawfulness of the internal tariffs and if necessary suspend or cancel the tariffs.

    the FMC opposed S. 2086 on the grounds that the ICC did not show a need for the legislation, even though it was claimed that the bill offered “energy savings” DOT opposed the bill because it “could have the effect of retarding the expansion of energy of energy efficient and shortest single carrier service where a need is shown...”  DOT believed the bill would force carriers into joint arrangements that might not be in their best economic interest, since “single line costs should normally be lower than joint line costs” The Association of American Railroads also opposed the bill, claiming that it is called for mandatory and compulsory intermodal routes prescribed by the ICC when no need had been shown for such authorization.


Alternative Jurisdictions

    Since the issue arose 12 years ago, many proposals have been made on how to solve the problem or jurisdictional conflicts over intermodal tariffs. There is little doubt that regulation by three different agencies presents a diffuse and uncoordinated system. As a foreign trade balances become more important in our economy, the need grows for a coordination of cargo transportation among the various modes extending to foreign markets. Assuming intermodal tariffs are necessary, therefore an alternative to the present regulatory scheme seems equally necessary.

    One alternative is the establishment of a joint board among agencies, with mandatory jurisdiction that could be invoked either by private parties or by any of the transportation agencies. Such a joint board already exists between the ICC and the CAB, though it cannot be mandatory invoked.  The proposed joint between two agencies with the third agency casting the deciding vote or any of the agencies involved could veto an intermodal tariff before the board.  It is questionable procedure, however, to allow one agency to decide disputes between the other two or allow each agency to judge intermodal tariffs by its own statutory standards.  Such an arrangement would not solve the jurisdiction conflict.  Alternatively, the joint board could be a permanent autonomous body with equal representation from each of the agencies, and with statutory authority for inter agency rule making and adjudication.  The permanent joint board could draw upon the expertise of all agencies to identify and deal with particular problems of intermodal transportation.  Problems it is unable to solve within its prescribed powers could be referred to Congress.  The danger is that the permanent board might effectively become a separate intermodal agency with internal conflicts of its own.

    Another alternative is the establishment of an entirely new agency with exclusive jurisdiction over international intermodal tariffs.  Theoretically, this agency could be authorized to operate under existing or newly-created statutory standards but as a practical matter this could give rise to more conflicts than already exist in the present scheme. The new agency might have the advantage of new statutory authorization, but the existing agencies’ distinct methods of regulation would somehow have to be assimilated in the new authorization.  The process may be so costly and take such a long time to complete that it may not merit execution


A third alternative is to merge the three regulatory agencies involved into one agency with jurisdiction over all modes of transportation.  Of course, the problem of assimilation would remain.  Nevertheless, there have been many serious proposals for such a merger. A merger would solve choice of law and conflict of jurisdiction problems. Of course, the effort to achieve harmony by forming one agency could be a chaotic process, and might require more time and money than are available.  

    Another alternative, presented to Congress in the bills discussed above, is to extend exclusive jurisdiction over international intermodal tariffs to one existing agency.  Though this may solve the procedural jurisdictional conflict, the substantive law of the agencies would still conflict.  Congress has already considered the matter and taken no action.  Giving more power to one agency than to another without clear justification presents obvious policy problems.

    A last alternative would be to continue the existing division of responsibility and to rely on inter agency cooperation and common rule making  Though the agencies have not made common rules, they have made efforts toward cooperation. Ex Parte 261, for example, seems to be a workable framework for resolving at least the current jurisdictional conflicts.




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