[Federal Register Volume 59, Number 42 (Thursday, March 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4908]
[[Page Unknown]]
[Federal Register: March 3, 1994]
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INTERSTATE COMMERCE COMMISSION
[Ex Parte No. MC-198 (Sub-No. 1)]
Policy Statement on Motor Contract Requirements Under the
Negotiated Rates Act of 1993
AGENCY: Interstate Commerce Commission (ICC).
ACTION: Policy statement.
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SUMMARY: The ICC is issuing a policy statement (set forth below)
explaining and interpreting new statutory requirements governing the
form and minimum contents for transportation agreements executed by
motor contract carriers. These new requirements are in section 6 of the
Negotiated Rates Act of 1993 (Pub. L. 103-180) and apply to contracts
entered into after March 3, 1994. The Commission does not plan to issue
a further decision unless the comments expose issues that require
additional clarification.
DATES: This policy statement is effective on February 28, 1994.
Comments are due on April 4, 1994.
ADDRESSES: Send comments (an original and 10 copies), referring to Ex
Parte No. MC-198 (Sub-No. 1), to: Office of the Secretary, Case Control
Branch, Interstate Commerce Commission, Washington, DC 20423.
FOR FURTHER INFORMATION CONTACT: Richard B. Felder (202) 927-6373. [TDD
for hearing impaired: (202) 927-5721.]
SUPPLEMENTARY INFORMATION: Section 6 of the Negotiated Rates Act of
1993 (NRA), added new statutory requirements governing the form,
minimum contents, and retention period for transportation agreements
executed by motor contract carriers, as well as regulatory auditing and
enforcement by the Commission of contract carriage requirements. By
this policy statement, we discuss these new requirements and explain
how we interpret certain of the new provisions.
Background
The new requirements are similar to our prior regulations at 49 CFR
1053.1 (1991 ed.). They required contract carriers to enter into
bilateral written contracts that (inter alia): (a) Named the particular
shipper or shippers involved, and (b) covered a series of shipments
during a stated period of time in contrast to separate contracts of
carriage governing individual shipments. A number of defunct carriers
have sought to disavow their own contract carriage agreements by
alleging technical noncompliance with those regulations.1 In an
effort to prevent such a misuse of its regulations, the Commission
repealed those regulations, in Contracts for Transportation of
Property, 8 I.C.C.2d 520 (1992) (Contracts), app. pending sub nom.
Central States Motor Freight Bureau, Inc. v. ICC, Nos. 92-1258 et al.
(D.C. Cir. argued June 12, 1992; petitioners' motions to dismiss as
moot pending). In section 6 of the NRA, Congress adopted the essential
requirements of the repealed regulations. Congress' stated objective
was ``to limit the potential for unwarranted future undercharge
claims.'' H. Rep. 103-359, 103d Cong., 1st Sess. 10 (1993).
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\1\See, e.g., General Mills, Inc.--Petition for Declaratory
Order, 8 I.C.C.2d 313 (1992), aff'd sub nom. United Shipping Co. v.
General Mills, Inc., Adv. No. 4-89-345 (Bankr. D. Minn. Aug. 27,
1992) (In re United Shipping Co., No. BKY 4-88-533(D)), aff'd, No.
3-92-0668 (D. Minn. Dec. 24, 1992), app. pending sub nom. The
Bankruptcy Estate of United Shipping Company, Inc. v. General Mills,
Inc., No. 93-1232MNST (8th Cir. argued Oct. 11, 1993).
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Requirements of Section 6 of the NRA
Section 6(a) of the NRA contains the new regulatory requirements to
be codified at 49 U.S.C. 10702(c).2 New section 10702(c)(1) of the
Interstate Commerce Act requires that, for motor transportation
contracts entered into after March 3, 1994 (i.e., 90 days after
enactment of the NRA), there must be ``a written agreement, separate
from the bill of lading or receipt.'' This requirement is identical to
the writing requirement in former 49 CFR 1053.1. It is important to
remember that the signed agreement must be in place before the
transportation begins.
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\2\ In sections 6(b) and 6(c) of the NRA, Congress amended 49
U.S.C. 11901(g) and 11909(b), respectively, to provide for civil and
criminal penalties for violations of these new requirements.
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New section 10702(c)(2) specifies the minimum contents of the
agreements. Section 10702(c)(2)(A) requires that the agreement
``identify the parties thereto.'' This requirement follows our
requirement in former 49 CFR 1053.1 that the contract provide for
transportation for a particular shipper or shippers. Signatories to the
agreement must be persons authorized to bind the parties to the mutual
undertakings described in the contract.
Section 10702(c)(2)(B) requires that the agreement ``commit the
shipper to tender and the carrier to transport a series of shipments.''
This reflects the longstanding definition at 49 U.S.C. 10102(15)(B),
which limits contract carriage of freight to ``transportation of
property for compensation under continuing agreements with one or more
persons'' (emphasis added). A long line of Commission decisions
addresses the meaning of ``a series of shipments'' in the context of a
continuing agreement. See, e.g., Interstate Van Lines, Inc.--
Extension--Household Goods, 5 I.C.C.2d 168, 185-86 (1988) (Interstate
Van Lines). On the one hand, isolated shipments or so-called spot
market transportation are not sufficient to satisfy the series of
shipments standard. See, e.g., Global Van Lines, Inc. v. ICC, 804 F.2d
1293, 1300 (D.C. Cir. 1986). On the other hand, the standard can be met
by a short-term agreement3 or a so-called requirements contract
that contemplates shipper tender and carrier transportation obligations
for specified traffic regardless of its frequency or amount. In the
first rulemaking to address the subject, the Commission made clear that
``the contracts need not cover long periods of time or fixed amounts of
traffic.'' Contracts of Contract Carriers, 1 M.C.C. 628 (1937). In
determining whether an agreement meets the series of shipments
standard, we will continue to be guided by the essential commitment
between the parties that transportation be offered and accepted on a
continuing basis. See Zoneskip, Inc. v. UPS, Inc. and UPS of America,
Inc., 8 I.C.C.2d 645 (1992) (Zoneskip), aff'd sub nom. Zoneskip, Inc.
v. United States, 998 F.2d 1007 (table) (3d Cir. 1993).
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\3\As far back as 1937, the Commission found ``an agreement to
transport property extending for a week, with a further provision
that it will continue from week to week until terminated, is an
agreement for continuous transportation.'' Edward Webb, Jr. Contract
Carrier Application, 1 Fed. Carr. Cas. (CCH) 7037 (1937).
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Section 10702(c)(2)(C) requires that the written agreement
``contain the contract rate or rates for the transportation service to
be provided or being provided.'' Neither Congress nor the Commission
has previously required that the particular rate be specified. In
interpreting this new requirement, we must accommodate both the purpose
of the NRA, in reforming contract carrier requirements, and the policy
of the Motor Carrier Act of 1980 (1980 Act) of ``remov[ing] many of the
obstacles that (previously) kept motor contract carriers from realizing
their full potential.'' H. Rep. 96-1069, 96th Cong., 2d Sess. 22
(1980), reprinted in 1980 U.S. Code Cong. & Ad. News 2283 (``House
Report''). Our goal is to protect the integrity of contract carriage
without harming contracting parties or competition.
Accordingly, we interpret this new requirement to mean that either
a fixed rate or a methodology for determining the rate must be in or
appended to the contract. This comports with the rate requirements for
common carrier tariffs, as articulated in Regular Common Conference v.
United States, 793 F.2d 376, 379 (1986) (RCCC), which require that a
common carrier tariff show on the face of the tariff either the per-
unit rate or how the per-unit rate is determined. For example,
contracts for annual volume or incentive rates are permissible as long
as an objective methodology for computing the rate is provided in the
agreement itself. References may be made in the agreement to tariffs or
other readily available publications or materials.
We believe the RCCC standard is appropriate for contract rates.
Under this standard, the parties to the agreement can maintain pricing
flexibility while achieving the Congressional goal of guarding against
a future challenge to the existence or level of the contract rate. The
price will be determinable without unduly interfering with the pricing
of contract carriage services.
Finally, section 10702(c)(2)(D) requires that the agreement ``(i)
state that it provides for the assignment of motor vehicles for a
continuing period of time for the exclusive use of the shipper; or (ii)
state that the service is designed to meet the distinct needs of the
shipper.'' This reflects the longstanding alternative statutory
criteria for contract carriage at 49 U.S.C. 10102(15)(B) (i) and (ii).
As we read this language, the agreement need not detail how it meets
these statutory criteria, but rather simply must specify which of the
two alternative statutory tests is met. We do not believe that Congress
meant to make contract drafting an unduly burdensome task or to require
a contract to contain legal argument. The requirement, however, does
serve to remind parties of the statutory criteria that must be met to
qualify as contract carriage.
Those criteria (dedication of equipment or distinct needs) are
flexible, and how they are satisfied can be tailored to the particulars
of each contracting situation. As interpreted by the Commission, ``* *
* assignment of equipment to the exclusive use of the shipper does not
necessarily require that specific vehicles be used for one shipper to
the exclusion of all others * * * [but] the contracting shippers must
have primary access to the equipment, may view it as their own, and
need not compete for its use among themselves or with others'',
Continental Contr. Car. Corp. Ext.--Modif. of Permit, 121 M.C.C. 882,
900 (1975).
The distinct needs alternative has been the subject of numerous
Commission and court decisions. Distinct needs can be price and/or
service features tailored to the customer's requirements. For example,
the distinct needs of a shipper may be met if: ``the new service is
better tailored to fit the special requirements of a shipper's
business, the length of its purse, or the select nature of the delivery
service that is desired.'' ICC v. J-T Transport Co., 368 U.S. 81, 93
(1961). Other services that have been found to meet distinct needs are:
Special pickup and delivery requirements; special documentation
requirements; shipper-carrier liaisons; specialized liability, claims,
or credit terms; incidental transportation services; and special rate
considerations. See, e.g., Interstate Van Lines, 5 I.C.C.2d at 187-89.
Transportation services that meet a contract customer's distinct
needs need not be unique. They may be services that common carriers
offer to their customers as well.4 The issue is whether the
services provided are tailored to meet the customer's distinct needs in
the context of an on-going contractual relationship. See Zoneskip, 8
I.C.C.2d at 653-55.
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\4\Central & So. Motor Frt. Tariff Ass'n v. United States, 757
F.2d 301, 311 & n.55 (D.C. Cir.), cert. denied, 474 U.S. 1019, 106
S. Ct. 568 (1985) (decision that exempted motor contract carriers
from our tariff filing requirements).
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Section 10702(c)(3) introduces a new requirement that written
agreements for contract carriage must be retained by the carrier for
the life of the agreement and for 3 years thereafter, and that a copy
be made available to the Commission upon request. The latter
requirement relates to the new statutory directive in section
10702(c)(4) that we ``conduct periodic random audits to ensure that
motor contract carriers are complying with [the requirements of section
10702(c)] and are adhering to the rates set forth in their
agreements.'' We will be conducting these audits, on a random basis,
beginning in May 1994.
To purchase a copy of the decision, write to, call or pick up in
person from: Dynamic Concepts, Inc., room 2229, Interstate Commerce
Commission Building, Washington, DC 20423. Telephone: (202) 289-4357/
4359. [Assistance for the hearing impaired is available through TDD
services (202) 927-5721.] Environmental and Energy Considerations.
This action does not require environmental review because it does
not have the potential for significant environmental impacts. 49 CFR
1105.6(c)(7).
Regulatory Flexibility Analysis
Because this is not a notice of proposed rulemaking within the
meaning of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.),
we need not make the small business impact examination required by the
RFA. Nevertheless, we welcome any comments regarding the small entities
considerations embodied in the RFA.
Decided: February 15, 1994.
By the Commission, Chairman McDonald, Vice Chairman Phillips,
Commissioners Simmons and Philbin.
Sidney L. Strickland, Jr.,
Secretary.
[FR Doc. 94-4908 Filed 3-2-94; 8:45 am]
BILLING CODE 7035-01-P