Court Opinion

ID: 8597690
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:05:07.137072+00
Date Added: 2024-06-11T14:10:39.877677
License: Public Domain

BENNETT, Judge,
delivered the opinion of the court:
This is a case on the availability to the government of its reduced shipping rates under section 22 of the Interstate Commerce Act.1 The question is whether those rates apply to shipments, on government bills of lading, of materials *429sold by the government to foreign countries under the Arms Export Control Act.2 We hold that section 22 rates are not applicable to such shipments.
Plaintiff is a motor carrier. In 1977, plaintiff carried explosives for defendant from various depots of defendant to various domestic ports. This was the domestic leg of shipping those explosives to foreign countries under foreign military sales contracts executed by defendant. The government bills of lading for two-thirds of the shipments had special annotations that, as foreign military sales shipments, the lower government shipping rates allowable under section 22 of the Interstate Commerce Act would not apply,3 and, for all of the shipments, plaintiff charged and was paid at the standard rates. GSA, however, on audit of the billing, determined that section 22 rates were applicable and deducted the differential from other sums owed to plaintiff. Plaintiff sues for refund of that amount, stipulated to be $34,669.57.
Section 22 of the Interstate Commerce Act is a special exception to the Act’s prohibition of discriminatory rates, permitting carriers to agree with the government to a lower rate schedule for government carriage. At the time of the events in this case, the section read:
Nothing in this chapter shall prevent the carriage, storage, or handling of property free or at reduced rates for the United States * * *.
49 U.S.C. § 22 (1976) (recodified in amended form at 49 U.S.C. § 10721 (Supp. Ill 1979)). Such a lower rate schedule had been agreed upon between defendant and plaintiff.
The primary issue on the facts before us is whether plaintiff carried the explosives "for the United States” within the meaning of section 22. Putting aside for the moment whether the bill of lading annotations contractually modified the rate structure, it is otherwise indisputable that shipments eligible for a lower rate automatically receive it. It is general rate law that a shipper is given the benefit of the lowest applicable rate. Emery Air Freight *430Corp. v. United States, 205 Ct. Cl. 49, 63, 499 F.2d 1255, 1262 (1974); Union Pac. R.R. v. United States, 163 Ct. Cl. 473, 479 (1963); Western Pac. R.R. v. United States, 150 Ct. Cl. 1, 11, 279 F.2d 258, 264 (1960).
Plaintiff asserts that the test of section 22 is not met when goods are transported that have been sold under the authority of the Arms Export Control Act, the authority for the foreign military sales contracts in this case. Section 2792(b) of that Act provides that the government shall not bear the financial burden of such services as the carriage provided by plaintiff:
Administrative expenses incurred by any department or agency of the United States Government (including any mission or group) in carrying out functions under this chapter which are primarily for the benefit of any foreign country shall be fully reimbursed from amounts received for sales under [other sections] of this title.
22 U.S.C. § 2792(b) (1976) (since amended). Plaintiffs argument is that this mandate on the government to collect reimbursement for shipping charges means that the shipping should not be regarded as "for the United States.” Applying the lower government rate in such a reimbursement situation would result in the benefit flowing only to the reimbursing foreign country, which is ineligible under section 22 to receive it. Defendant’s response to this contention is that plaintiffs focus on the financial benefits and burdens is too narrow, that the United States benefits greatly from the improved foreign relations that foreign military sales foster, and that such a benefit is sufficient to satisfy section 22.
Plaintiffs argument is the correct one. It is plain from the history of litigation over section 22 that government rates are applicable only when a direct and substantial, pecuniary benefit flows to the government. Interpretation of Government Rate Tariff for Eastern Central Motor Carriers Ass’n, 323 I.C.C. 347, 349-50 (1964) (Eastern Central), and cases cited therein; Southern Pac. Transp. Co. v. United States, 205 Ct. Cl. 451, 505 F.2d 1252 (1974). "[T]he total benefit of special rates must accrue to the government. Therefore, section 22 rates are proper only where the *431government pays the charges or directly and completely reimburses the party which initially bears the freight charges.” Eastern Central at 351. In the foreign military sales situation, the benefit of improved foreign relations that the defendant claims is neither pecuniary nor sufficiently direct and substantial. The determining factor is who pays the cost, and this is exactly what defendant is mandated by the Arms Export Control Act not to do.
Eastern Central involved a situation strikingly similar to the one now before us. Carriers had requested the Interstate Commerce Commission to rule whether section 22 rates were applicable to carriage on commercial bills of lading which stated that the government would reimburse the initial payer. In advising that section 22 rates would apply, the Commission focused directly on the reimbursement situation and ruled that it is the reimbursing party that should be seen as receiving the benefit of the carriage. In Eastern Central, the reimbursing party was the government and section 22 rates were used. In the instant case, however, the reimbursing party is not eligible for section 22 rates and so we hold against their use.
Defendant tries to distinguish Eastern Central on the ground that the instant case involves government bills of lading and not commercial ones. We find this distinction irrelevant to the policy put forth that the identity of the reimburser determines the applicability of the rate.
Defendant also contends for the applicability of section 22 rates to foreign military sales shipments because the foreign customers do not always reimburse. This argument does not help, however. First, defendant has not offered to show that it lacks reimbursement for the shipping charges involved in this case, and second, the Arms Export Control Act puts defendant under an affirmative duty to collect reimbursement. If defendant does not do so, it should not be further allowed to shift the resulting financial burden, or part of it, to the carrier.
Since the court holds that plaintiffs carriage of explosives was not "for the United States” for the purposes of section 22, we do not need to address the question of whether the bill of lading annotations would have been contractual modifications of section 22 rate applicability.
*432Accordingly, plaintiffs motion for summary judgment is granted, defendant’s cross-motion for summary judgment is denied, and judgment is entered for plaintiff in the sum of $34,669.57.

 49 U.S.C. § 22 (1976) (recodified in amended form at 49 U.S.C. § 10721 (Supp. III 1979)).

 22 U.S.C. § 2751 et seq. (1976 & Supps.).

 Typed on these bills of lading was: "foreign military sales shipment, section 22 DOES NOT APPLY.”