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Parties Involved:
Health and Personal Care Distribution Conference, Inc.
Intervenor
Interstate Commerce Commission
Respondent
Mallinckrodt Specialty Chemicals Company
Intervenor
National Classification Committee
Petitioner
National Industrial Transportation League
Intervenor
National Motor Freight Traffic Association
Petitioner
National Small Shipments Traffic Conference, Inc.
Intervenor
United States of America
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 22, 1995 Decided April 11, 1995

No. 94-1032

NATIONAL MOTOR FREIGHT TRAFFIC ASSOCIATION,

AND NATIONAL CLASSIFICATION COMMITTEE,

PETITIONERS

v.

INTERSTATE COMMERCE COMMISSION, AND

THE UNITED STATES OF AMERICA,

RESPONDENTS

MALLINCKRODT SPECIALTY CHEMICALS COMPANY, ET AL.,

NATIONAL SMALL SHIPMENTS TRAFFIC CONFERENCE, INC.,

HEALTH AND PERSONAL CARE DISTRIBUTION CONFERENCE, INC.,

AND NATIONAL INDUSTRIAL TRANSPORTATION LEAGUE,

INTERVENORS

On Petition for Review of an Order of the

Interstate Commerce Commission

-

John R. Bagileo argued the cause for petitioners. With him on the briefs was William W. Pugh.

Craig M. Keats, Associate GeneralCounsel, Interstate Commerce Commission, argued the cause for

respondents. With him on the brief were Henri F. Rush, GeneralCounsel, ICC, Anne K. Bingaman,

Assistant Attorney General, John P. Fonte, and Robert B. Nicholson, Attorneys, U. S. Department

of Justice. Judith A. Albert, Attorney, ICC, entered an appearance.

On the joint brief of intervenors were Daniel J. Sweeney for Mallinckrodt Specialty Chemicals

Company, et al., Nicholas J. DiMichael, Richard D. Kortin, and Michael Kane for National

Industrial Transportation League.

Before EDWARDS, Chief Judge, GINSBURG, and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge GINSBURG.

GINSBURG, Circuit Judge: The National Motor Freight Traffic Association, Inc. and the

NationalClassification Committee of the NMFTA petition for review of two orders of the Interstate

CommerceCommission cancelling the petitioners' proposed "classrate" tariff. Because the ICC used

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a standard that isinsupportable in light of other decisionsit has made, we grant the petition for review

and remand the matter to the Commission.

I. Background

A motor carrier subject to the jurisdiction of the ICC is required to establish and file with the

Commission a tariffshowing the rates it will charge for transportation. 49 U.S.C. §§ 10702, 10761,

10762. Rather than file an individual tariff for every transported commodity, carriers often use a

so-called class rate tariff, which sets forth the rate for transportation of a commodity based upon its

"classification rating."

A classification rating is a number between 50 and 500 that is meant to reflect the

"transportability" of a commodity. In general, the higher the number, the more difficultand hence

more expensiveit isto transport the commodity. The Commission evaluates the classification rating

of a particular commodity upon the basis of four factors: (1) density, expressed as weight per cubic

foot; (2) stowability, that is, the ease of loading and unloading; (3) handling, including any special

care that must be used or conditions that must be maintained; and (4) liability, the potential for

damage to, or damage caused by, the commodity.

The classification rating of a commodity is published in a "classification tariff." While any

carrier may file one, the most widely used classification tariff is the National Motor Freight

Classification Tariff (NMFCT), which the petitioners publish pursuant a "rate bureau agreement."

See 49 U.S.C. § 10706(b)(2) (exempting such collective rate setting from antitrust laws).

The Commission, upon its own initiative or upon "application of an interested party," may

investigate the lawfulness of a newly filed classification tariff. 49 U.S.C. § 10708. In such a

proceeding, "the burden is on the carrier proposing the changed ... classification ... to prove the

change is reasonable," as required by 49 U.S.C. § 10701(a). 49 U.S.C. § 10708(c).

The NMFCT long provided a classification rating of 200 for substancesthat were designated

"Class A Poisons" by the Department of Transportation, including various poisonous gases, gas

mixtures, and liquids, and a rating of 150 for poisonous gases and gas mixtures "other than Class A

Poisons" (including the DOT's "Class B Poisons" and "Irritating Materials"). In 1985, however, the

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DOT adopted a new nomenclature for poisonous materials; it began by designating 36 chemicals

"poison-inhalation hazards" (PIHs). See DOT Docket No. HM-196, Packaging and Placarding

Requirements for Liquids Toxic by Inhalation, 50 Fed. Reg. 41092 (1985). In 1991 the DOT

scrapped the old typology altogether and deemed PIHs more than 100 additional chemicals, many of

which were not listed poisons under the old scheme. See DOT Docket No. HM-181, Performance

OrientedPackaging Standards; Changes to Classification, Hazard Communication, Packaging and

Handling Requirements Based on UN Standards and Agency Initiative, 55 Fed. Reg. 52402 (Dec.

21, 1990), as amended, 56 Fed. Reg. 47158 (Sept. 18, 1991) (hereinafter HM-181 ). The DOT also

categorized the PIHs into four "hazard zones" labelled, in descending order of toxicity, A through

D.

Because theDOT's newsystemeliminated the old designations incorporated into the NMFCT,

all poisons could now be classified in the NMFCT only as "other than Class A poisons." The

petitioners therefore proposed a new classification tariff in which all PIHs in hazard zones A or B

would have a classification rating of 200, while all PIHs in hazard zones C or D would have a

classification rating of 150. While this change corrected some of the problems caused by the new

DOT nomenclaturethe classification rating of 11 commodities would be lowered from 200 to 150,

that of eight raised from 150 to 200it did not simply restore the status quo ante because many of

the materials that the DOT had designated PIHs in HM-181 had not previously been classified as

either Class A or Class B poisons or as Irritating Materials. Thus, under the proposed tariff, the

classification rating of 96 commodities newly designated PIHs would significantly increase, as would

the rate for shipping those commodities.

Severalshippers(intervenors here) protested the tariff, causing it to be suspended and forcing

the ICC to determine whether the proposed changes are "reasonable." See 49 U.S.C. § 10701(a).

The Commission, first in an unpublished preliminary decision (issued August 27, 1993), and finally

in Classification Ratings on Poisons, NMFC, 9 I.C.C.2d, Dkt. No. M-30430 (Nov. 18, 1993),

concluded that the tariff was not reasonable because the proponents(petitioners here) failed to show

a "substantial change in the transportation factors... ofthe ... commoditiesinvolved." Commissioner

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Walden dissented on the ground that the proponents did not need to show a "substantial change" in

the transportation factors for the proposed classifications to be "reasonable" under the statute.

Recurring to the four factors relevant to overall transportability, the Commission found first

that the petitioners had not shown that HM-181 had any adverse effect upon the "relatively high"

density ofthe newly designated PIHs. Likewise, the Commission found no evidence of "a substantial

change in [stowability] since HM-181 became effective," and faulted the petitioners for failing to

present "sufficient data to show how handling under HM-181 requirements is substantially different

from [what it was under] the prior regulations." As for liability, the Commission suggested that by

imposing more stringent safety standards upon the transport of PIHs, the new DOT regulations

actually decreased the potential for detrimental loss or harm.

The petitioners now argue that the Commission's requirement that they show a "substantial

change" in the transportation characteristics of a commodity in order to justify its reclassification is

a "new, unexplained test." The Commission's established practice, they say, has been to approve

changes to classification ratings if the proposed ratings are similar to those for commodities with

similar transportation characteristics. We agree, and we hold that the ICC cannot require the

petitioners to show a "substantial change" in order to demonstrate that a proposed reclassification

is reasonable so long as it allows other parties to justify reclassifications simply on the ground that

they are similar to those established for other commodities with similar characteristics.

II. Analysis

The ICC haslong allowed a carrier to show that a proposed classification rating isreasonable

by comparing it to the ratings of other commodities with similar transportation characteristics.

Indeed, the Commission has expressly acknowledged this standard, both prior to its decision in this

case, see Motor Classification Ratings on Candy or Confectionery, 353 I.C.C. 314, 329 (1977) ("A

long-recognized test of the reasonableness of a classification rating is the relationship that a

commoditybearsto the ratings applied oncommodities having similartransportation characteristics"),

and since, see Classification Ratings on Intermediate Bulk Containers, National Motor Freight

Classification, Dkt. No. M-30436 (August 30, 1994) (not printed) ("It is well-settled ... that

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comparisons of diverse commodities having similar transportation characteristics is an acceptable

method of demonstrating the reasonableness of a proposed classification").

The Commission has offered no explanation, either in its decision or in its brief before this

court, for uniquely requiring the petitioners to show a "substantial change" in the transportation

factors of the PIHs before they can be reclassified. In its preliminary decision, the Commission cited

Investigation into Motor Carrier Classification, 367 I.C.C. 243 (1983), for the proposition that "the

proponent ofthe reclassificationmust demonstrate a substantial change in the transportation factors."

In that case, the Commission streamlined what had been a 15-factor inquiry and adopted the four

transportation factors it still uses to evaluate a proposed reclassification; it said nothing, however,

about how the factors are to be applied in a particular case, much less about requiring a showing that

they have substantially changed.

In its brief, the Commission cites a 1969 case in which it approved a reclassification because

it was "satisfied that there ha[d] been a change in the transportation characteristics and conditions ...

since the establishment of the ratings." Classification Ratings, Paper or Plastic Drinking Straws,

335 I.C.C. 1, 4 (1969). This unremarkable statement indicates that a substantial change in

transportability is a sufficient condition for a reclassificationit would be remarkable ifthat were not

the casebut neither it nor any other decision to which the Commission points suggests that such

a change is a necessary condition for a reclassification.

The only case we have found in which the Commission imposed a "substantial change"

requirement isClassificationRating onAcids,NMFC, 8 I.C.C.2d 851 (1992),reviewdenied on other

grounds, National Classification Committee v. ICC, 22 F.3d 1174 (D.C. Cir. 1994). In that case,

as in this, the Commission provided neither authority nor reasoning for such a test. On review, we

did not reach the issue, however, as we upheld the agency upon another ground. See NCC, 22 F.3d

at 1176 n.1.

We now hold that the ICC may not condition approval of a proposed reclassification upon

the proponent showing a substantial change in the transportation factors while it deems other

classification ratings "reasonable" simply because they are comparable to the ratings of commodities

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with similar characteristics. The circumstances of this case well illustrate the Commission's error.

The Commission's usual practice does not favor retaining rail-derived classifications where

a comparison with similar goods yields a different result. See, e.g., Classification Rating, Boxes or

Crates, Wood&WireCombined, 335 I.C.C. 754, 757-58 (1970) ("Although the protestantsstate that

the present ... rating ... is presumably just and reasonable because it has been in effect since 1936, we

cannot overlook the fact that this rating was copied from the railroad classification and is not

necessarily based upon circumstances peculiar to transportation by motor vehicle. Of greater

significance are certain more recent motor carrier decisions [concerning similar materials]"). The

ratings ofsome 79 ofthe commoditiesinvolved in this case have not been reexamined since theywere

adopted wholesale from preexisting railroad classifications when motor carrier rates were first

regulated in 1936. The "substantial change" rule, however, would make it impossible for the

petitioners to file new rates for any of the 79 commodities the transportability of which has not

changed since 1936, even though the original classification was dictated by convenience rather than

by considered judgment, and the proposed rate is reasonable when compared to rates for similar

goods.

The Commission argues that requiring it to undertake different inquiries for rail-derived and

non-rail-derived ratings would unduly burden its capacity to evaluate classification ratings. We

express no view upon that claim, for we see no occasion for the ICC to use two different standards:

the Commission's "substantial change" test is equally irrational as applied to the proposed ratings for

non-rail-derived classifications. As long as the rating for any one commodity may be deemed

reasonable by virtue of its relation to the rating of another commodity with similar transportation

characteristics, any change in the rating of the latter commodity may change the rating for the former

commodity, quite apart from any change in the transportation characteristics of the former

commodity.

In the present case, for example, the ratings of many commodities were changed when the

DOT first promulgated new rules in 1985. This and perhaps other factorse.g., a greater

appreciation for the hazards ofsome poisonsunreflected in the 1936 ratings, may have altered the

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surrounding landscape enough to call into question the classification ratings of allPIHs. Whether this

has in fact occurred is an issue for the Commission to assess on remand; but it must be open to that

possibility.

III. Conclusion

We can conceive of no justification for requiring the petitioners to show a substantial change

in the transportation factorsfor PIHsso long asthe Commission elsewhere accepts comparisons with

similar commodities as support for a classification. We therefore grant the petition for review, and

remand the matter to the Commission so that it may apply an appropriate standard to determine

whether the petitioners' proposed tariff is lawful.

So ordered.

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