The Law of Intermodal Transportation:
What It Was, What It Is, What It Should
Be
Paul Stephen
Dempsey, Ph.D., J.D.
Director of the
National Center for Intermodal Transportation
Director of the
Transportation Law Program
Professor of Law
University of Denver
DISCLAIMER: The contents of
this report reflect the views of the authors, who are responsible for the facts
and the accuracy of the information presented herein. This document is disseminated under the sponsorship of the
Department of Transportation, University Transportation Centers Program, in the
interest of information exchange. The
U.S. Government assumes no liability for the contents or use thereof. The authors retain the right to publish the
report in appropriate journals and books.
The United States has assumed a
position of world leadership in its efforts to reduce or eliminate tariff
barriers, trade inhibitions, and investment restrictions, enabling goods,
technology, services, and capital to move freely between States in the
international arena.[1] As a part of this effort, the United States
has sought to reduce, to the extent practicable, domestic impediments in the
field of transportation so as to optimize the unobstructed transit of
commodities between inland origins and overseas destinations and between
overseas origins and inland destinations.
The U. S. also has concluded formal and informal bilateral and
multilateral agreements designed to minimize the barriers which obstruct the
free flow of commerce between nations, and to minimize domestic restraints on
transnational commercial activity. As a result of these efforts, we are
witnessing a spectacular increase in the importation and exportation of goods.
These overwhelming increases in
foreign trade have been brought about, in part, by a diminution in transport
inhibitions. In a circular fashion, the
present reexamination of the existing legal framework in the field of
transportation is, to a certain extent, attributable to these massive increases
in foreign commercial activity and the concomitant demands for an efficient and
economical transportation network which have inevitably arisen therefrom.[2] It is this contemporary evaluation of
traditional legal and technological concepts in the field of international transportation
to which this essay is addressed.
In our era of rapidly diminishing
impediments to the free flow of capital, goods, technology, and services
between nations, transnational commercial activity has become extremely
important to our national economy. New
frontiers are being broken as raw materials and manufactured products move more
freely between nations which have heretofore shared little in culture, history,
religion, race, or economic and political philosophy. Certainly, governmental initiatives designed to eliminate trade
inhibitions are responsible for much of this growth. Tariff walls are crumbling.
The world economy is prospering.
The interdependencies that flourish between members of the world
community as a result of bilateral and multilateral trade agreements enhance
the possibility of achieving long-term political stability, economic growth,
and global peace. It has become the
position of the United States that increased international economic cooperation
will inevitably lead to increased political toleration and peaceful
coexistence.
Innovations in the field of
transportation have made possible increased commercial activity promoting
greater interdependency between nations.
Intermodal transport innovation in the United States has been of
essentially two kinds: (1)
technological innovation, enabling commodities and individuals to move with
greater speed, efficiency, and economy; and (2) regulatory innovation by
Federal agencies responsible for regulating the rates and routes of
international carriers.
Of the technological innovations,
the “container revolution” is perhaps the most significant, for it has done
more to foster the growth of international trade than any other single
intermodal breakthrough. Containerization
permits individual commodities to be loaded by the consignor at the point of
origin without interim handling again until the container arrives at its
ultimate destination and is unloaded by the consignee. Between the points of origin and
destination, the trailer or container may be transported as a single unit by
motor, rail, water, or air carriers with a substantial reduction in transit
time, expense, loss, damage, and theft from that experienced under traditional
break-bulk carriage.[3] Containerization may also produce greater
energy efficiency in transportation and stabilize transport costs.[4] By the late 1970s, containerized
trailer-on-flatcar [TOFC] movements represented 7.2 percent of tonnage moved by
rail;[5]
it was anticipated that air/motor through movements would exceed 6.5 million
billion-ton miles during this period, a growth rate of approximately six
percent.[6] Moreover, there are a number of recent
developments that may cause this trend to accelerate.[7] By the late 1990s, rail intermodal
transportation was a $7.3 billion business with an anticipated annual growth
rate of between 6-8%.
Intermodal transportation utilizes
the inherent advantages of each mode involved, creating synergies and
efficiencies not otherwise attainable.
The service provided is different from and superior to that available
from either mode alone. Carriers joined
in intermodal combinations seek to provide a complete, "seamless"
intermodal through service from origin to destination. Carriers whose services have historically been
restricted to one mode of transportation are transforming into large
multi-modal companies through joint ownership[8]
or contractual agreement. Whether used to create new types of service, to lower
rates to attract more traffic, or to lower costs to increase profitability,
these arrangements are reshaping transportation.
Among the more dramatic contemporary
shifts in transportation patterns has been the growth of multimodal
international movements. For import or
export traffic that is originating from or destined to U.S. points,
rail/water/motor carrier combinations are often employed. Moreover, the United States has become a
"land bridge" for a substantial amount of traffic that neither
originates from nor is destined to U.S. shippers, but instead is moving between
Europe and the Far East.[9]
Statutory and regulatory innovation has also
contributed to the enormous contemporary growth of transnational commercial
activity. This latter type of
innovation shall be explored in this essay.
After this introduction, the chapter is divided into three primary
sections. In the first, we examine the
origins of intermodal law and regulation.
In the second, we review the contemporary legal landscape on intermodal
transportation. In the third, we
recommend several potential improvements in the legal regime.
II.
INTERMODAL TRANSPORT LAW:
WHAT IT WAS
THE PRE-DEREGULATION
DIVISION OF REGULATORY RESPONSIBILITIES: ICC, CAB, & FMC
Prior to deregulation there was a
tripartite division of regulatory responsibility over foreign commerce
transportation in this nation among three separate Federal administrative
agencies: the Interstate Commerce Commission [ICC],[10]
the Civil Aeronautics Board [CAB],[11]
and the Federal Maritime Commission [FMC].[12] Prior to its sunset in 1996, the ICC was by
far the largest of the three, regulating the surface transportation of over
18,000 railroads, motor carriers, pipelines, domestic water carriers, brokers,
and freight forwarders. Prior to its
sunset in 1985, the CAB had jurisdiction over the transportation of direct air
carriers (airlines) and indirect air carriers (e.g., air freight forwarders)
operating within, to, and from the United States.[13] More than eighty domestic air carriers were
subject to the jurisdiction of the CAB.[14] The FMC regulated all United States flag and
foreign flag carriers operating in foreign commerce, and United States carriers
serving Alaska and Hawaii. Almost forty
domestic maritime carriers were subject to regulation by the FMC.[15] Today, the agency holds jurisdiction over
ocean transportation, in domestic-offshore and foreign commerce, by vessel
operators, non-vessel operators [NVOs], and independent ocean freight
forwarders.[16]
In 1887 Congress promulgated the Act
to Regulate Commerce,[17]
creating the ICC and affording to it the primary responsibility to prevent and
correct rate discriminations by railroads.
It was not until the Transportation Act of 1920,[18]
however, that Congress articulated a specific declaration of policy for the agency. That Act required the ICC “to promote,
encourage and develop water transportation, service, and facilities in
connection with the commerce of the United States, and to foster and preserve
in full vigor both rail and water transportation.”[19] After 1920, the scope of Interstate and
foreign commerce subject to the jurisdiction of the ICC expanded
dramatically. For example, the Motor
Carrier Act of 1935[20]
brought for-hire common and contract motor carriers within the ambit of ICC
regulation. The Transportation Act of
1940[21]
brought Interstate water carriers within the Commission’s jurisdiction. Two years later, freight forwarders were
brought within the regulatory scheme.[22]
It was in the 1940 legislation that
Congress expressed its most significant declaration of the national
transportation policy up to that time.
It directed that the ICC shouuld:
Provide for fair and impartial regulation of all
modes of transportation subject to the provisions of this Act . . . so
administered as to recognize and preserve the inherent advantages of each; to
promote safe, adequate, economical, and efficient service and foster sound
economic conditions in transportation and among the several carriers; to
encourage establishment and maintenance of reasonable charges for transportation
services, without unjust discriminations, undue preferences or advantages, or
unfair or destructive competitive practices; to cooperate with the several
States and the duly authorized officials thereof; and to encourage fair wages
and equitable working conditions – all to the end of developing, coordinating,
and preserving a national transportation system by water, highway, and rail, as
well as other means, adequate to meet the needs of the commerce of the United
States, of the Postal Service, and of the national defense.[23]
This
expression of policy delegated to the ICC the responsibility for coordinating all modes of transportation, including
those not subject to its regulation.
In contrast, however, the Federal
Aviation Act of 1958[24]
confined its policy declaration to air transportation and directed the CAB to
coordinate transportation between air carriers. More specifically, it required:
(a) The encouragement and development of an
air-transportation system properly adapted to the present and future needs of
the foreign and domestic commerce of the United States, of the Postal Service,
and of the national defense.
(b) The regulation of air transportation in such a manner as to
recognize and preserve the inherent advantages of, assure the highest degree of
safety in, and foster sound economic conditions in, such transportation, and to
improve the relations between and coordinate transportation by, air carriers;
(c) The promotion of adequate, economical, and efficient service by
air carriers at reasonable charges, without unjust discriminations, undue
preferences or advantages, or unfair or destructive competitive practices;
(d) Competition to the extent necessary to assure the sound
development of an air-transportation system properly adapted to the needs of
the foreign and domestic commerce of the United States, of the Postal Service,
and of the national defense;
(e) The promotion of safety in air commerce; and
(f) The promotion, encouragement, and development of civil
aeronautics.[25]
Similarly, the Merchant Marine Act
of 1936[26]
emphasized that the FMC should concern itself with but a single mode of
transportation:
It is
necessary for the national defense and development of its foreign and domestic
commerce that the United States shall have a merchant marine (a) sufficient to
carry its domestic water-borne commerce and substantial portion of the
water-borne export and import foreign commerce of the United States and to
provide shipping service essential for maintaining the flow of such domestic and
foreign water-borne commerce at all times, (b) capable of serving as a naval
and military auxiliary in time of war or national emergency, (c) owned and
operated under the United States flag by citizens of the United States, insofar
as may be practicable, (d) composed of the best-equipped, safest, and most
suitable types of vessels, constructed in the United States and manned with a
trained and efficient citizen personnel.
It is declared to be the policy of the United States to foster the
development and encourage the maintenance of such a merchant marine, and (e)
supplemented by efficient facilities for shipbuilding and ship repair.[27]
As can be seen, the ICC was given a
unique responsibility to foster the coordination of a national transportation
system by all modes. Of the several
regulatory agencies, the ICC alone was charged with the duty to consider all
transportation modes in the exercise of its regulatory functions, and not only
those within its jurisdictional ambit.
The ICC recognized that the “development of a truly coordinated
transportation system must, within the terms of [its] statutory mandate, take
precedence over the more narrow interests of those carriers directly subject to
the Interstate Commerce Act.”[28] The ICC recognized that “[t]he shipping
public must have available not only a ready choice of all modes of carriage,
but also a workable flexibility which will enable them to utilize to the
fullest the inherent advantages of each mode in coordinated movements of single
shipments.”[29] The ICC was subject to a unique statutory
directive to protect the competition among the different modes of
transportation subject to its regulation.
It could maintain the rates of one carrier to protect the traffic of
another if necessary to protect an “inherent advantage” of the latter.[30]
Within this multi-agency network,
the emergence of the container revolution and the growth of foreign trade
created a need for efficiency and cooperation among the Federal regulatory
bodies.[31]
FACILITATING THE CONTAINER REVOLUTION
Containerization, which has
undergone an enormous growth in recent decades, represents an expeditious,
economical, and efficient means of facilitating intermodal transportation. In its simplest form, it involves the
shipment of freight as a unit from origin to ultimate destination in vans or
boxes.[32] The typical containerized export movement,
for example, might involve (a) the loading of widgets by their manufacturer
into a single van-type container, (b) the movement of the container by motor carrier
from the manufacturer’s inland domicile to the port facilities of Savannah, (c)
the placement at Savannah of the container aboard a maritime vessel destined
for Hamburg, (d) the movement at Hamburg of the container from the maritime
vessel to a rail flatcar destined for Stuttgart, and (e) the unloading at
Stuttgart of the container’s contents by the consignee. Had the widgets in the above example not
moved via container, their transport would have necessitated individual loading
and unloading at each of the aforementioned points, thereby increasing labor
costs, time consumption, and damage and loss claims.[33] Containerized transportation, in contrast,
obviates the need for individualized handling of commodities at points other
than the ultimate origin and destination.
Containerization thereby substantially reduces transit time, handling
and export packaging expenditures, and the possibility of damage and pilferage.[34] It permits freight to be loaded at inland
origins and remain untouched throughout the journey until the containers arrive
at inland destinations. Its utilization
promises predictability of overall transportation costs, improved control and
coordination of intermodal shipments, and rate reductions.[35]
Although containerization has
heretofore had its greatest impact in the maritime industry, an increasing
volume of United States foreign trade is now transported by air. The loading and handling efficiency of
containerized shipments is a natural complement to the speed of air
transportation. New jumbo jets are
capable of handling even the bulky containers, and are therefore able to
provide coordinated movements in conjunction with surface carriers.[36]
Containerization has had a profound
impact, not only upon the technology of transportation and facilitation of
international trade, but also upon the procedures of those governmental
entities charged with regulating and coordinating foreign commerce
movements. Moreover, its full potential
has not yet been realized. It is
estimated that eighty percent of all general freight cargo in foreign commerce
is containerizable.[37]
With the growth of TOFC operations,[38]
the ICC acquired some measure of regulatory expertise in the coordination of
containerized intermodal shipments.
TOFC transportation, more popularly known as “piggyback” service, is a
bimodal operation involving the movement of commodities, trailers, or
semi-trailers of motor carriers and on the flatcars of rail carriers.[39] Such transportation combines the expeditious
and economically advantages associated with rail transport with the versatility
of motor carriage.[40] The Interstate Commerce Act[41]
authorized the voluntary establishment of just and reasonable through routes
and joint rates,[42] charges and
classifications between motor and rail carriers, or between motor and water
carriers (including FMC regulated ocean carriers transporting commodities
between Alaska and Hawaii and the contiguous forty-eight States). The ICC readily approved such arrangements,
and its regulatory efforts were a substantial contribution to the expansion of
innovative concepts in surface transportation.[43]
The ICC frequently acknowledged that
containerization is a progressive innovation which facilitates the intermodal
coordination of operations and the efficiency and economy of transportation,
and should therefore be encouraged.[44] Thus, where a public need existed which
cannot adequately be satisfied by existing transportation services, authority
was granted for the transportation of empty containers between port cities and
inland points.[45] The grant of authority to transport empty
containers along with loaded containers obviated the necessity of deadheading
containers in return movements to seaports and maximized the efficiency and
economy of such operations by permitting the free transfer of containers from
interior breakbulk to stuffing points.[46] The grant of authority in such circumstances
frequently had the effect of advancing the development of intermodal
maritime-land operations consonant with the Commission’s declared policies.
In
summary, prior to deregulation U.S. economic regulation of transportation in
foreign commerce was divided among three separate regulatory agencies. The ICC had jurisdiction over some 18,000
rail, motor, and water carriers, brokers, and freight forwarders. By far the largest of the three “sister”
agencies, it performed its regulatory responsibilities pursuant to the
Interstate Commerce Act [ICA].[47] The Civil Aeronautics Board regulated
domestic and international direct air carriers (airlines) and indirect air
carriers (e.g., air freight forwarders).[48] Then as now, the Federal Maritime Commission
had jurisdiction over common carriers operating United States and foreign flag
vessels [VOs, or maritime carriers] and non-vessel operators [NVOs, or ocean
freight forwarders].[49] The inevitable legal problems that arose as
a result of this overlapping jurisdiction stimulated quasi-judicial and
quasi-legislative activity in each of the three agencies.
Of
these three agencies, the ICC was charged by Congress with a unique statutory
directive to promote the coordination of all modes of transportation, even
those not subject to its jurisdiction.[50] Thus, it was recognized that the development
of a coordinated system of transportation must take precedence over the more
narrow interests of those carriers directly subject to ICC jurisdiction.[51] Similarly, the ICC noted that the public
must have available not only a multiplicity of transport modes from which to
choose, but also a working flexibility that permits an optimum utilization of
each mode of transportation in coordinated through movements.[52] Moreover, the ICC further recognized that it
is in the public interest to adopt regulatory policies that promote the free
flow of international commerce between the United States and its neighbors.[53]
As noted, the ICC developed great
regulatory expertise in intermodal transportation even before the advent of the
“container revolution,” for it had regulated trailer-on-flatcar or “piggy-back”
service for a considerable period. TOFC
essentially involves the bimodal transportation of trailers on rail flatcars
for a portion of a through movement, and the movement of the trailers attached
to the tractors of motor carriers for the remainder thereof.[54]
The ICC frequently acknowledged the
innovative nature of containerization, which permitted the efficient and
economical coordination of intermodal operations.[55] In Zirbel
Transport, Inc., Ext.--Containers[56]
the Commission emphasized, with particularity, the benefits to be derived from
increased employment of containerized operations:
[I]t has always been the policy of this Commission
to encourage the development of intermodal transportation, and we believe that
containerization is a useful, innovative tool in that development. The services proposed in this and other
recent applications offer numerous benefits directly to the shipping
public. Among these benefits are: a reduction in packaging requirements;
increased shipment integrity resulting in a reduction in loss, damage, and
pilferage; less handling and warehousing; avoidance of terminal congestion and
interchange delays; faster transit times; energy conservation; and more
efficient use of equipment. The
bottom-line benefit is, of course, less costly transportation of goods for the
public at large.[57]
Similarly,
in AAA Transfer, Inc., Ext. – Cargo
Containers,[58] the ICC
recognized the following characteristics of containerized transportation:
The benefits to be derived from the utilization of
intermodal transportation of freight in containers include reduced (1) costs,
(2) transit time, (3) in-transit damage to lading, (4) difficulty in affixing
responsibility for loss and damage, and (5) incidence of components becoming
separated from concurrently shipped base commodities. Successful containership service depends to a substantial degree
upon rapid operation of vessels between ports and concomitantly, reduction of
the time consumed in port for unloading and loading cargo. Containerships now generally call only at
the largest of ports, and often hundreds of containers are unloaded at one time
from a single vessel. Offloaded
containers must promptly be removed from the port facilities, and arriving
containers must be delivered according to the water carrier’s loading schedule
if they are to make the intended sailing.
Coordination of movements is also required in the repositioning of empty
containers and of chassis and flat-bed trailers. In addition, certain receivers of freight require timed pickups
or deliveries in order to facilitate the unloading or loading of shipments and
to prevent disruption of plant production.
Without expeditious motor common carrier service the full potential
benefits of intermodal containerized freight service cannot be realized.[59]
This regulatory philosophy facilitated a tremendous
increase in the employment of containers in through intermodal carriage. Moreover, the ICC explicitly emphasized its
policy of promoting containerization, intermodal coordination, and cooperation
in transportation.[60] Operating authority was granted for the
movement of empty containers between port facilities and inland points,[61]
thus maximizing efficiency by permitting the freer transfer of containers
between break-bulk and stuffing points.
Authority was not required for the return movement of empty containers
to the point of origin when the containers have been utilized in authorized
outbound transportation.[62] Operating authority was required, however,
for the transportation of empty containers to a point other than the origin of
the initial loaded container shipment.[63]
FOREIGN COMMERCE REGULATION
AND THE LAND BRIDGE EXEMPTION
Pursuant to the Interstate Commerce
Act,[64]
the ICC had jurisdiction over the transportation of passengers and property by
motor carriers engaged in foreign commerce.
Foreign commerce was defined by section 203(a)(11) of the ICA as
Commerce, whether such commerce moves wholly by
motor vehicle, or partly by motor vehicle and partly by rail, express, or
water, (A) between any place in the United States and any place in a foreign
country, or between places in the United States through a foreign country; or
(B) between any place in the United States and any place in a Territory or
possession of the United States insofar as such transportation takes place
within the United States.[65]
This statutory definition created the land bridge
exemption, which exempted commerce moving from a foreign country in a
continuous movement through the United States to another foreign country from
economic regulation by the ICC.[66] For example, commodities originating in
London and destined for Toronto could be transported from the port of New York
to points on the international boundary line between the United States and
Canada as an exempt motor carrier movement.
The exemption might also encompass a much more lengthy segment of
surface transportation. Thus, for
example, commodities manufactured in Hong Kong might be transported by an FMC
regulated ocean vessel to Oakland, thence across the United States by motor
carrier to Norfolk in an unregulated exempt movement, and then by FMC carrier
to Rotterdam.
The land bridge exemption was
consistent with article V of the General Agreement on Tariff and Trade [GATT],[67]
which provides, inter alia, that “[t]here shall be freedom of transit through
the territory of each contracting party, via the routes most convenient for
international transit, for traffic in transit to or from the territory of other
contracting parties.” The exemption was
also alluded to in most treatise of friendship, commerce, and navigation [FCN],
into which the United States has entered with numerous nations. The FCN treaty between the United States and
Japan,[68]
for example, includes the typical provision regarding freedom of transit. Article XX provided:
There shall be freedom of transit through the
territories of each Party by the routes most convenient for international
transit . . . for products of any
origin en route to or from the territories of such other party. Such persons and things in transit . . .
shall be free from unnecessary delays and restrictions.[69]
INTERMODAL MERGERS &
ACQUISITIONS
The Interstate Commerce Commission authorized
numerous intermodal acquisitions[70]
that have created integrated transportation companies.[71]
Acquisitions
of Motor Carriers. The Interstate Commerce Act
stated that the ICC “may approve…[a rail application to acquire a motor
carrier] only if it found that the transaction was consistent with the public
interest, would enable the rail carrier to use motor carrier transportation to
public advantage in its operations, and would not unreasonably restrain
competition.”1 Traditionally, the ICC interpreted this
provision to allow only the acquisition of motor carriers providing operations
“auxiliary and supplemental” to rail services, and not to authorize the
approval of a motor carrier having unrestricted operating rights in the absence
of “special circumstances.”2
Hence, the ICC traditionally viewed the Interstate
Commerce Act as
permitting
rail carriers to hold non-rail-related motor carrier operating authority only
when warranted by compelling public need for service not offered by existing
motor carriers.3 The purpose of Congress’ general prohibition
on dual authority, as upheld by the Supreme Court,4 was to protect motor carriers from
domination by their more powerful competitors, the railroads.5
As the ICC explained: “The main purpose for the policy…was to prevent
the railroads from acquiring motor operations through affiliates and using them
in such an manner as to unduly restrain competition of independently operated
motor carriers.”6
In 1982, the ICC abandoned the
special circumstances doctrine in the issuance of unrestricted operating
authority to motor carrier subsidiaries of railroads.7
In 1983, the Denver & Rio Grande became the first rail carrier to
receive unrestricted operating rights for its trucking subsidiary.8
In 1986, Burlington Northern, Inc., a railroad holding company, received
ICC approval to acquire six motor carriers.9 That same year, the ICC approved the
Norfolk/Southern Railway’s $370 million acquisition of North American Van
Lines, the nation’s largest household goods carrier.10 In 1986, Union Pacific Corporation
announced an agreement to acquire the nation’s fifth largest motor carrier, Overnite
Transportation Co., for $1.2 billion.11
In an important opinion rendered in
the fall of 1986, International
Brotherhood of Teamsters v. ICC (Teamsters I),12 the
Court of Appeals for the District of Columbia Circuit held the ICC’s
eradication of the special circumstances doctrine inconsistent with the
provisions of the Interstate Commerce Act governing rail acquisition of motor
carriers.13 The Act imposed a tripartite test upon such
transactions: (1) they must be in the “public interest”; (2) they must “enable
the rail carriers to use motor carrier transportation to public advantage in
its operations”; (3) they must “not unreasonably restrain competition.”14
The second prong of that test led the court to remand the ICC’s approval
of Norfolk/Southern’s acquisition of North American Van Lines.15
Applying the methodology announced
earlier by the Supreme Court in Chevron
U.S.A., Inc. v. Natural Resources Defense Council, Inc.,16 the District of Columbia Circuit found
the first and third criteria sufficiently ambiguous that it could rely on the
ICC’s interpretation.17 However, the court deemed the second
criterion precise enough to reflect a clear congressional intent regarding the
question at issue: that “rail carriers…be allowed to acquire only motor
carriers that would be useful in rail operations.”17
In its 1984 policy statement, the ICC had erroneously concluded that the
statutory requirement would be satisfied if the acquired motor carriers would
be used in its “overall transportation operations.”17
Because many of North American’s operations were, and would continue to
be, unrelated to supplementing rail services, the rail acquisition violated the
statute’s requirement that railroads may acquire motor carriers only for
purposes of improving rail operations.18
After remand, a curious rider was
attached to anti-drug legislation in the closing days of the ninety-ninth
Congress. The rider effectively
grandfathered approval of any acquisition of a motor carrier by a railroad
agreed to before the District of Columbia Circuit’s opinion in Teamsters I.19 Apparently the several railroads that
had such acquisitions pending utilized their political power to open the window
wide enough for them to pass through.
Shortly thereafter, the ICC sought
withdrawal of the Teamsters I opinion
on grounds that the legislation had turned it into a mere advisory opinion, the
acquisition issue was moot, and the question was nonjusticiable. In International
Brotherhood of Teamsters v. United States (Teamsters II),20 the court declined to withdraw its
prior opinion, on grounds that there were other unresolved issues appropriate
for remand. But in light of the
supervening legislation, it reversed those portions of its decision relevant to
section 11344 (c).21 Nonetheless, the two decisions appear to
revive the “special circumstances” doctrine, at least for rail acquisition not
shielded by the 1987 anti-drug legislation.22
Acquisitions
of Water Carriers. Two sections of the Interstate
Commerce Act governed ICC jurisdiction over rail acquisitions of water
carriers. The first was the general
provision applicable to all mergers or acquisitions of control not involving
two class I railroads. The ICC was
required to approve the transaction unless it concluded that:
1.
As
a result of the transaction, there is likely to be a substantial lessening of
competition, creation of a monopoly, or restraint of trade in freight surface
transportation in any region of the United States: and
2.
the
anticompetitive effects of the transaction outweigh the public interest in
meeting significant transportation needs.23
The second section was more specifically directed to
water carrier acquisitions. No carrier
could acquire a competing water carrier unless, with respect to carriers that
do not operate via the Panama Canal, the ICC concluded that such acquisition
“will still allow that water common carrier or vessel to be operated in the
public interest advantageously to interstate commerce and that it will still
allow competition, without reduction, on the water route in question.”24
In 1984, the ICC approved CSX’s $725 million acquisition of American Commercial Lines, Inc., which had as a subsidiary the nation’s largest inland water carrier, notwithstanding the fact that there was extensive intermodal competition between the two.25 In June of 1986, CSX acquired Sea-Land Corporation for $800 million.
EXEMPTIONS
The Staggers Rail Act of 1980 conferred broad
exemption authority upon the Interstate Commerce Commission. Commodities and services that have been
exempted include all traffic moving in boxcars or in "piggyback"
(trailer-on-flatcar/container-on-flatcar, or TOFC/COFC) service, [72] and a long list of individual commodities,
such as motor vehicles, fresh fruits and vegetables, lumber, furniture, poultry
and meats, butter and cheese, sand and gravel, and most manufactured products.[73] Thus, intrastate movements made by an
Interstate railroad on railroad-owned trucks have been exempted from
regulation.[74] The Commission also extended its approval of
an agreement among various rail carriers for the pooling of intermodal cars.[75] However, the Congress has denied the STB
authority to exempt carriers from the
intermodal ownership prohibitions, from “full liability” terms in cargo loss
and damage, or from labor protection obligations in line sales, mergers or
acquisitions.[76]
RATE REGULATION
The
existence of intermodal competition became an important threshold factor in
determining whether the ICC would exert regulatory oversight of railroad
rates. The Staggers Rail Act of 1980
reduced the ICC’s jurisdiction over rates significantly by providing that the
Commission had jurisdiction over them only if the traffic was “market dominant”
and the proposed rates were more than 170% of variable costs.[77] Railroads were free to raise or lower rates
at well unless, with respect to an increase, the carrier had market dominance
over the traffic, or with respect to a decrease, the rates would be lowered
below a “reasonable minimum” (if the rate was above the variable costs of
providing the service, it was conclusively presumed to contribute to “going
concern value” and therefore be above a reasonable minimum). Staggers also frees railroads to enter into
contracts with shippers covering rates and levels of service.
The ICC defined “market dominance” in such a way
that it was rarely deemed to exist.
According to the Commission’s interpretation, it did not exist if there
was intermodal competition, intramodal competition, product competition, or
geographic competition.[78]
The Commission also took the position that carriers should be
generally free to raise rates until they either become “revenue adequate” or
“stand alone costs” are achieved.[79] Stand alone costs are essentially what it
might cost an electric utility, for example, to lay its own rail line to a coal
mine. The net result was that, in the
vast majority of cases, shippers could obtain no relief from what they believed
were onerous rail rates.[80] Producers of coal and electric utilities
called for legislative relief from this administrative deregulation or, failing
that, a sunset of the Interstate Commerce Commission.
SUNSET OF THE INTERSTATE
COMMERCE COMMISSION; EMERGENCE OF THE SURFACE TRANSPORTATION BOARD
Several pieces of legislation whittled away at the
jurisdiction of the Interstate Commerce Commission, ultimately leading to its
sunset. The Motor Carrier Act of 1980,
the Staggers Rail Act of 1980, and the Bus Regulatory Reform Act of 1982, all
diminished the ICC's jurisdiction. The
Surface Freight Forwarder Deregulation Act of 1986 deregulated freight
forwarders other than those handling household goods. Freight forwarders are central to many intermodal movements. The Negotiated Rates Act of 1993 [NRA]
addressed problems arising out of outdated regulatory requirements in the
trucking industry. The Trucking
Industry Regulatory Reform Act of 1994 [TIRRA] further reduced Federal
regulation of the trucking industry.
Moreover, TIRRA expanded the ICC's exemption authority to embrace many
aspects of trucking regulation. The ICC
Termination Act of 1996 sunset the Interstate Commerce Commission, deregulated
and amended certain functions, and transferred jurisdiction over rail, motor,
bus, broker, freight forwarder and pipeline services to the newly created Surface
Transportation Board [STB] and the DOT office of Motor Carrier Information
analysis [MCIA]. The STB is a
three-member quasi-independent panel within the U.S. Department of
Transportation. The MCIA was a part of
the DOT’s Federal Highway Administration.
Jurisdiction over railroads and pipelines is now vested in the STB. Jurisdiction over motor carriers, water
carriers, brokers and freight forwarders is now vested in the Secretary of
Transportation.
CREATION OF THE U.S.
DEPARTMENT OF TRANSPORTATION
Discussions about creating a Federal
Department of Transportation [DOT] began as early as 1940.[81] In the 1960s, the Landis Report[82]
cited the need for an office to coordinate and develop a national
transportation policy. In 1961, the
Doyle Report recommended not only creation of a Department of Transportation
but also the merger of all transportation regulatory functions into a unified,
fully intermodal regulatory body.[83] This led President Kennedy to ask his aides
to offer suggestions concerning transport policy. Legislation passed by Kennedy in 1961 provided the first Federal
program of urban transit support.[84] With Kennedy’s assassination, the task force
on transportation advised President Lyndon Johnson that no focal point for
transportation existed in the Executive Branch, and that therefore a
cabinet-level Department of Transportation should be created.[85] The bill creating the DOT was signed on
October 15, 1966, and the agency was established on April 1, 1967, with Alan S.
Boyd as the first Secretary of Transportation.[86]
The DOT essentially was created from
an amalgamation of several pre-existing governmental agencies. From the Interstate Commerce Commission was
transferred the Bureau of Railroad Safety (which formed a part of the Federal
Railroad Administration [FRA]), and the Bureau of Vehicle Safety (which formed
a part of the Federal Highway Administration [FHWA]). The independent Federal Aviation Agency (which had earlier been
split off from the Civil Aeronautics Board) became DOT’s Federal Aviation
Administration. The Commerce Department
gave DOT the St. Lawrence Seaway Development Corporation, surrendered to the
FHWA the National Highway Safety Bureau, and gave the FRA the Office of
Groundspeed Transportation. The Treasury Department gave it the Coast
Guard. The Department of Interior gave
the FRA the Alaska Railroad. A new
quasi-independent agency, the National Transportation Safety Board, was also
housed within DOT.[87]
III. INTERMODAL TRANSPORT LAW: WHAT IT IS
THE INTERMODAL
SURFACE TRANSPORTATION EFFICIENCY ACT OF 1991
As noted above, in the Transportation Act of 1940,
Congress set forth a Statement of national transportation policy, which
included an obligation that the Interstate Commerce Commission [ICC] (which
regulated the surface modes of transportation) shall “provide for a fair and
impartial regulation of all modes of transportation . . . all to the end of
developing, coordinating, and preserving a national transportation system by
water, highway, and rail, as well as other means, adequate to meet the needs of
the commerce of the United States . . . .”[88] Though Congress would embrace intermodal
facilitation as an important policy goal in several subsequent legislative
acts, several decades would pass before intermodalism would take center stage
in national policy.[89]
As the Interstate Highway System
neared completion in the early 1990s, the focus in transportation priorities
shifted away from new highway construction.
Congressional attention turned instead to alternatives to the single-occupancy
vehicle [SOV] to satiate the public’s desire for mobility. Concerns over congestion, sprawl and
pollution, all of which defied political jurisdictional boundaries, emerged as
political issues. Congress also
recognized that the separate and isolated modal networks were not linked
together well. Seamless connectivity
between modes might well allow Americans to enjoy the inherent advantages of
all modes.
The Intermodal Surface Transportation Efficiency Act
of 1991 [ISTEA] established new national priorities in areas of economic
progress, cleaner air, energy conservation and social equity, requiring that
the intermodal transportation system be “economically efficient and
environmentally sound . . .” as well as “energy efficient . . . .”[90] In the legislation, Congress declared that
it is in the “national interest to encourage and promote the development of
transportation systems embracing various modes of transportation in a manner
which will efficiently maximize mobility of people and goods within and through
urbanized areas and minimize transportation-related fuel consumption and air
pollution.”[91]
Significantly, the Intermodal
Surface Transportation Efficiency Act of 1991 was the first highway bill in the
nation’s history to have expunged the word “highway” from its title. This legislation provided enhanced
flexibility for State and local governments to redirect highway funds to
accommodate other modes and modal connections.[92] In ISTEA’s legislative history, Congress
concluded:
An intermodal transportation system . . . to enhance
efficiency will be the key to meeting the economic, energy and environmental
challenges of the coming decades. The
nation will not be able to meet all of those demands through continued reliance
on separate, isolated modes of transportation.
Development of an intermodal transportation system
will result in increased productivity growth the nation needs to compete in the
global economy of the 21st Century. We
can no longer rely on a transportation system designed for the 1950s to provide
the support for American industry to compete in the international marketplace.[93]
By placing the word “intermodal” (as opposed to the
historical “highway” term) in the title
of the bill, Congress sought “to bring the need for intermodalism to the
forefront of the nation’s transportation and economic debate.[94] ISTEA authorized $156 billion for fiscal
years 1992-1997, but not just for highways.
It shifted Federal transportation policy from traditional highway
funding for automobiles to a system which creates intermodal systems that
include highways, rail and mass transit in a comprehensive system, with
seamless connectivity between modes.[95] ISTEA enhanced State and local governmental
flexibility in redirecting highway funds to accommodate other modes and pay for
transit and carpool projects, as well as bicycle and pedestrian facilities,
research and development, and wetland loss mitigation.[96] It created flexible guidelines that cut
across traditional boundaries in allowing expenditures on highways, transit and
non-traditional areas (e.g., vehicle emission inspection and maintenance).[97] According to DOT, “This flexibility will
help State and local officials to choose the best mix of projects to address
air quality without being influenced by rigid Federal funding categories or
different matching ratios that favor one mode over the other.”[98]
ISTEA discouraged continued reliance on the
automobile and expanded highways while encouraging the seamless movement of
people and goods between modes of transportation.[99] For example, the Federal match for new or
expanded facilities to be available for single-occupancy vehicles is reduced to
75% (compared with an 80% Federal match on other highway projects).[100] The transit match is increased to 80% to
achieve parity in matching ratios between the modes.[101]
ISTEA also gave Metropolitan Planning Organizations
[MPOs] expanded funding for planning purposes and authority to select projects
for funding, thereby significantly expanding their jurisdiction by authorizing
MPOs to allocate Federal highway funds.
Under ISTEA, the MPO, in consultation with the State, selects all
Federal highway, transit and alternative transportation projects to be
implemented within its boundaries, except for projects undertaken on the
National Highway System and pursuant to the Bridge and Interstate Maintenance
programs. Projects on the National
Highway System and pursuant to the Bridge and Interstate Maintenance Program
are selected by the State in cooperation with the MPO. ISTEA also required MPOs to “begin serious,
formal transportation planning”, and to “fiscally constrain” their long-range
plans and short-term Transportation Improvement Programs [TIPs], requiring MPOs
to create realistic, multi-year agendas of projects which could be completed
with available funds.[102] An opportunity for public comment must be
provided in preparation of both the long-rang plan and the TIP.[103] Prepared in cooperation with the State and
the local transit operator, and updated every two years, TIPs must include all
projects in the metro area to be funded under a Title 23[104]
and the Federal Transit Act, and be consistent with the long-range plan and the
Statewide Transportation Improvement Program [STIP]. The STIP usually covers a time frame of about three years and
describes specific projects or project segments, as well as their scope and
estimated cost. States must also
prepare a long-range transportation plan which identifies the State’s
transportation needs and proposed projects over a period of 20 years.[105] Under ISTEA, the MPO’s planning process, at
minimum, had to consider the following factors:
· efficient use of existing transportation facilities
· energy conservation goals;
· methods to reduce and prevent traffic congestion;
· effect on land use and land development;
· programming of expenditures for transportation enhancement
activities;
· effects of all transportation projects regardless of sources of
funds;
· international border crossings and access to major traffic
generators such as ports, airports,
intermodal transportation facilities, and major freight distribution
routes;
· connectivity of roads within the metropolitan area with roads
outside the metropolitan area;
· transportation needs identified by management systems;
· preservation of transportation corridors;
· methods to enhance efficient movement of commercial vehicles;
· life cycle costs in design and engineering of bridges, tunnels,
and pavement;
social, economic and environmental effects.[106]
The
Transportation Equity Act for the 21st Century of 1998 [TEA-21][107]
reaffirms and retains the planning provisions and MPO structure of ISTEA, with
its emphasis on Federal-State-local cooperation and pubic participation, though
significant changes were made in funding levels.[108]
TEA-21 replaced ISTEA’s fifteen factors to be considered in TIP preparation
with seven:
1.
Support
the economic vitality of the metropolitan area, particularly by enhancing
global competitiveness, productivity, and efficiency;
2.
Increase
the safety and security of the transportation system for motorized and
nonmotorized users;
3.
Increase
the accessibility and mobility options available to people and freight;
4.
Protect
and enhance the environment, promote energy conservation, and improve the
quality of life;
5.
Enhance the integration and
connectivity of the transportation system, across and between modes, for people
and freight;
6.
Promote
efficient system management and operation; and
7.
Emphasize
the preservation of the existing system.[109]
Congress has declared that among the transportation policies of the United States is “to encourage and promote development of a national intermodal transportation system . . . to move people and goods in an energy-efficient manner, provide the foundation for improved productivity growth, strengthen the Nation’s ability to compete in the global economy, and obtain the optimum yield from the Nation’s transportation resources.” [110] Congress created the U.S. Department of Transportation to “make easier the development and improvement of coordinated transportation service . . . .”[111] The Secretary of Transportation is required to coordinate Federal policy on intermodal transportation, and promote creation and maintenance of an efficient U.S. intermodal transportation system.[112] He is also obliged to consult with the heads of other Federal agencies to establish policies “consistent wit