Opinion ID: 6025
Heading Depth: 1
Heading Rank: 2

Heading: Warehousemen declaratory order (92-4691A)

Text: 4 In August 1991 the Association of Texas Warehousemen (Association) wrote the Railroad Commission of Texas (RCT) posing two questions: (1) whether the RCT considered the Texas leg of the transportation described above (from the warehouse to the customer) interstate or intrastate in nature; and (2) if intrastate, whether the RCT would seek to impose penalties or sanctions on parties not complying with RCT rates, rules, and orders. The RCT responded by letter, stating that an out-of-state shipment loses its interstate identity when it is consigned to a point in Texas without further instructions for delivery to another Texas location. The RCT also stated that it could assess administrative penalties against carriers, shippers, and aiders and abettors, including warehousemen, for not complying with RCT rates, rules, and orders. 5 The Association then petitioned the ICC for a declaratory order declaring that the Texas leg of the transportation was interstate. By order served March 27, 1992, the ICC found that the risk of imminent enforcement by the RCT presented a controversy sufficient to warrant the institution of a Sec. 554(e) declaratory proceeding. After the ICC requested and received numerous comments, it issued its declaratory order. The ICC concluded that, in light of its own precedents and the precedents of the federal courts, the transportation described in the Association's petition was in interstate commerce. 6 The ICC's declaratory order described the transportation, on which its order is predicated, as follows: 7 ... Merchandise moves by for-hire carriage from points outside Texas to warehouse or distribution centers located in Texas. The shippers temporarily store the merchandise in Texas warehouses, and then ship the merchandise to Texas destinations by carriers with interstate authority. The exact ultimate Texas destinations may or may not be known at the time the shipments leave the out-of-State origins.... 8 [T]he shippers do not initially consign the shipment from an out-of-State origin to the ultimate Texas consignee, but rather to themselves in care of the Texas warehouses. The shipment is consigned to the ultimate consignee in the second leg of the transportation.... The two legs are separately billed.... 9 . . . . . 10 ... Shipments are not made on through bills of lading and few, if any, storage-in-transit provisions are involved.... The warehouses receive no beneficial ownership interest in the goods. 11 With increasingly sophisticated computer systems, little merchandise is being stored solely for inventory or stock. About 70% of the freight shipped to petitioners' warehouses is based on historic consumption patterns within Texas. About 25% of the freight is in response to customer orders, and 5% is inventory for smaller customers. 6 12 Some repackaging and reconfiguration (secondary packaging) is performed. The warehouses do not process or otherwise modify the original products. In general, the goods are held in storage at the Texas warehouse less than 45 days. Less than 1% remains in storage more than 365 days. 13 Routing of the outbound shipment (the all-Texas portion) is usually handled by the warehouses, but the merchandise is always subject to the ultimate shipper's control and direction. The manner in which the freight charges are handled varies to some extent dependent upon whether less-than-truckload, truckload, or consolidated truckload traffic is involved.... [I]n all instances where the warehouse pays the freight charges, those charges are billed back to the warehouseman's customer [the shipper]. 14 The out-of-State shippers are willing, if necessary, to certify that they intend for their out-of-State origin shipments to move beyond the Texas warehouse point in a continuous interstate move.... 15 [T]he intrastate traffic is identifiable and traceable.... less than 1% of the traffic is commingled.... 16 8 I.C.C.2d at 478-81 & 490. (footnotes omitted). After the ICC issued its order, this petition for review followed.
17 Petitioners argue first that the ICC's declaratory order is impermissibly broad. Quoting the dissenting opinion of Vice Chairman McDonald, petitioners point to the generalized, global declaration of interstate jurisdiction based on an overly broad and vague record. See 8 I.C.C.2d 492. They argue that the order implicates an unknown multitude of shippers, carriers, products, and shipping patterns and that the breadth of the order therefore makes any determination of shipper intent impossible. 18 Congress commits to the sound discretion of the agency the decision whether to grant requested declaratory relief. 5 U.S.C. Sec. 554(e); 7 see also Intercity Transp. Co., No. 37476, J.A. at 4 (Aug. 30, 1983) (ICC has broad statutory discretion to grant or decline declaratory relief), aff'd, Intercity Transp. Co. v. United States, 737 F.2d 103 (D.C.Cir.1984). Our inquiry is limited to whether the agency has abused its discretion. Intercity, 737 F.2d at 106-07. Section 554(e) authorizes an agency to issue declaratory relief to terminate a controversy or remove uncertainty. See Central Freight Lines v. ICC, 899 F.2d 413, 417 (5th Cir.1990). 19 The ICC found that the correspondence between the RCT and the Association evidenced an imminent threat of state prosecution. Over the years, the ICC has issued orders declaring single-state transportation out of storage to be interstate or intrastate, depending on the particular fact of each case. See, e.g., Bigbee Transportation, Inc., No. MC-C-30065 (Nov. 1, 1988) (transportation found to be intrastate); Armstrong, Inc., 2 I.C.C.2d 63 (1986) (transportation found to be interstate). Despite numerous ICC decisions, RCT continued to ignore the various factors the ICC considers important in determining the interstate nature of transportation. When questioned by the Association in August 1991, RCT took the narrow position that an out-of-state shipment loses its interstate identity when it arrives at a warehouse without further instructions. The ICC stated that it ordinarily might hesitate to institute such a broad scale proceeding, but that RCT's consistent failure to consider any transportation pattern other than the limited one reiterated above requires additional action on our part to remove any lingering uncertainties as to what constitutes transportation in interstate commerce. Warehousemen, 8 I.C.C.2d at 486. The contested order applies to all shippers who can demonstrate that their shipping patterns match the general patterns assumed in the order. See 8 I.C.C.2d at 486. 20 We are persuaded that the ICC was reasonable and acted within its statutory authority in issuing its broad declaratory order. RCT had announced its intent to regulate all interstate shipments from Texas warehouses where the out-of-state shipper had not designated the final consignee. RCT's announced position was contrary to established ICC decisions that allowed shipper intent of a continuous, interstate shipment to be demonstrated by a variety of factors. This threat by RCT to regulate as intrastate commerce all shipments of this nature created a controversy and uncertainty among the parties about whether interstate or intrastate rates would apply to their shipments. A narrow order by the ICC would not have been helpful in resolving this controversy or removing this uncertainty created by the RCT regulation. We are persuaded that the order, when considered in light of the controversy, was not overbroad.
21 Petitioners next argue that the ICC was without jurisdiction to issue its order. The ICC has regulatory jurisdiction over for-hire motor carrier transportation in interstate commerce. 49 U.S.C. 10521(a)(1). States retain the authority to regulate wholly intrastate motor transportation. 49 U.S.C. 10521(b)(1). Petitioners argue that in regulating the Texas leg of the transportation, the ICC is trampling on the state's right to regulate intrastate commerce and is acting in excess of its statutory authority. Petitioners' argument is meritless. The ICC clearly has primary jurisdiction to determine, in the first instance, whether challenged transportation is interstate. 8 See Central Freight, 899 F.2d at 417; State of Texas v. United States, 866 F.2d 1546, 1551-54 (5th Cir.1989). We next consider the merits of the ICC's order.
22 In reviewing an ICC declaratory order, which we treat as an adjudicatory ruling, 9 ] this court may set aside the ICC's findings or conclusions only if they are arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. Sec. 706(2)(A); Central Freight, 899 F.2d at 419. In this case we need only to consider whether the ICC's conclusions are rationally supported. Central Freight, 899 F.2d at 419. 23 The fundamental standards governing the nature of interstate transportation are clearly established. Whether transportation between two points in a single state is interstate or intrastate depends on the essential character of the shipment. Texas & N.O.R.R. v. Sabine Tram Co., 227 U.S. 111, 122, 33 S.Ct. 229, 233, 57 L.Ed. 442 (1913); Central Freight, 899 F.2d at 419. The critical factor in determining the shipment's essential character is the fixed and persisting intent of the shipper at the time of the shipment. Id.; Baltimore & O.S.W.R.R. Co. v. Settle, 260 U.S. 166, 173-74, 43 S.Ct. 28, 31, 67 L.Ed. 189 (1922). The totality of the facts and circumstances will determine whether a shipper has the requisite intent to move goods continuously in interstate commerce. Central Freight, 899 F.2d at 419-20. 24 Petitioners argue first that the ICC's declaratory order is irreconcilable with controlling precedent. Specifically, petitioners argue that in previous decisions in which the ICC found a continuous interstate movement in circumstances similar to those presented in the contested order, the shipper had a manifest intent to move goods beyond the warehouse to an ultimate consignee. But as stated above, our task on review is to decide not whether we would construe the precedents as the ICC did, but whether the ICC's construction is reasonable and whether it has explained any departures from its past actions. Central Freight, 899 F.2d at 420-21 (citing Texas, 866 F.2d at 1556-57). 25 The ICC offers a number of explanations in support of its multi-factor approach. The ICC gave great weight to the fact that the shipper maintains control over the shipment from its out-of-state origin until it is delivered to the ultimate consignee. The ICC contends that the inclusion of this factor avoids conflict with Atlantic Coast Line R.R. v. Standard Oil Co., 275 U.S. 257, 48 S.Ct. 107, 72 L.Ed. 270 (1927). In that case two shippers, rather than one, controlled the transportation. Also in that case, sellers from Louisiana and Mexico did not intend for their oil to move beyond the consignee's storage stations in Florida. See id. at 269, 48 S.Ct. at 111. The consignee or the second shipper controlled the in-state movement of the oil to its Florida customers. 26 Under the order the warehouses may act on behalf of the shipper in routing the all-Texas portion of the shipment without destroying the interstate nature of the shipment, so long as the routing is subject to the original shipper's control and direction. 10 To maintain the shipment as interstate the ICC assumed that the shippers intended to ship their goods to the final destination, not just to the warehouse. See also The May Dep't Stores Co. and Volume Shoe Corp., MC-C-30146, at 7 (June 15, 1990) (continuity of interstate movement is not broken at warehouse when goods intended to move to ultimate destination). 27 The ICC also relied on the fact that the shippers are constantly matching shipments and customers based on historic consumption and demand patterns. 8 I.C.C.2d at 490. The ICC found that the shipper's analysis of historic consumer needs enabled it to send goods to the warehouse with the expectation that the goods would soon move--usually within 45 days--to their ultimate destinations. The ICC reasonably concluded that the warehousemen in this circumstance are merely a link in the chain of interstate commerce. 28 As stated above, the ICC's order lists numerous factors to be considered in their totality. Petitioners, on the other hand, isolate individual factors and cite cases involving a particular factor in an attempt to undermine the ICC's determination that the transportation is interstate. For example, petitioners argue that the in-state shipment from the warehouse is generally not considered interstate if the ultimate destination and ultimate consignee of each particular shipment is not known at the time of the original shipment. They cite Central Freight for the proposition that the ICC cannot rely on the mere intent to distribute the merchandise at some future time as evidence of shipper intent. See Central Freight, 899 F.2d at 422 (citing Surles Contract Carrier Application, 4 M.C.C. 488, 494 (1938)). Viewed in isolation and without the presence of any of the other factors on which the declaratory order is predicated, we agree with petitioners. But the factors listed in the ICC's order, bearing on shipper intent, must be considered in their totality. 11 See id. at 419-20. Petitioners' attempt to attack individual factors does not assist us in our analysis of whether the order is reasonable. 29 Petitioners also argue that essential factors that are necessary to a finding of shipper intent to ship goods in interstate commerce are missing from the order. Petitioners contend that a storage-in-transit provision must appear in the bill of lading to tie the two shipments together as a continuous interstate shipment. But we made it clear in Texas that this provision is just one of many factors that may bear on this question: 30 [T]he ICC did not decide that the use of a storage-in-transit privilege was dispositive of the interstate nature of the movement. The ICC noted that it was a strong indication of the through character of the movement, but relied in addition on the incidents surrounding the involved transportation. Without discussing them in detail, the ICC noted such indicia as the tracking and documentation linking the shipments coming in and going out of Arlington, and the fact that the goods are not processed, other than being cut to specification, at the temporary storage point. 31 Texas, 866 F.2d at 1560-61 (footnotes omitted). We conclude that the ICC's multi-factor test is not arbitrary or unreasonable, even in the absence of a storage-in-transit provision. 32 Petitioners also argue that the record does not support the following facts assumed by the ICC in its order: All of the shippers have computer-based inventory systems; the shippers use motor carriers with interstate operating authority for the shipments moving solely within Texas; only 1% of the goods is actually held in storage over one year; and the shippers actually exercise their right of control over the goods that are shipped within Texas from warehouse to customer. Petitioners misunderstand the nature of the ICC's order. The declaratory order simply determine[s] the legal consequences of the factual predicate presented by the warehousemen. Texas, 866 F.2d at 1551. The order would not insulate the warehousemen from a state regulatory proceeding if facts are presented which are different from those assumed in the declaratory order. See Central Freight, 899 F.2d at 418; Texas, 866 F.2d at 1551. 33 Next, petitioners point to the difficulties of applying the ICC's multi-factor test. They contend that the order does not demonstrate how shipper control is ever actually exercised over goods moving from warehouse to customer. They argue that the warehousemen actually serve as the second shipper. But the ICC admitted in oral argument that its declaratory order in Warehousemen does not resolve all future cases. For example, cases in which the parties dispute whether the shipper retains control over the goods during the second-leg of the shipment may need to be adjudicated. The order will resolve some disputes, others will be resolved in enforcement actions. The fact that the order does not resolve all cases does not render the ICC's finding of shipper control unreasonable. 34 Thus, in conducting a deferential review of the ICC's conclusions, we uphold as reasonable the ICC's application of its fixed and persisting intent rule based on a totality of the facts and circumstances. The fact that petitioners have made some persuasive arguments does not permit us to set aside the order. The ICC was not arbitrary or capricious in its determination that the essential character of the transportation presented by the Association was interstate. 35 Accordingly, the petitions in 92-4691A to review and set aside the ICC's declaratory order are DENIED.