1.2 Intrastate Commerce (vs. Interstate Commerce)

Intrastate commerce is the transportation of property between two points in the same state via routes wholly within that state. Although appearing to be academic on the surface, the distinction between and interstate and intrastate movement is often highly technical and difficult to distinguish when a shipment “comes to rest” in a warehouse or terminal, changes modes or undergoes some processing or change in transit.

A common misconception is that if a shipment “comes to rest” at some intermediate point, for storage for instance, it breaks the through transportation into two segments, one of which may have been interstate and the other an intrastate local delivery to final destination or a pier for export. “Coming to rest” is NOT the sole criterion for distinguishing between interstate and intrastate or foreign commerce.

The U.S. Supreme Court stated in Southern Pacific Terminal Co. v. I.C.C., 219 U.S. 498 (1911) and Texas & New Orleans R.R. v. Sabine Tram Co., 227 U.S. 111 (1913) that the fact that a shipment may temporarily stop, change modes, proceed under a new contract of lading, or undergo packing or processing incidental to the transportation does not affect the interstate character of the shipment. Likewise, interruptions in the movement affect the interstate or foreign character of the movement only insofar as they negate intent with respect to destination.

In Baltimore & O.S.W.R. Co. v. Settle, 260 U.S. 166, 171 (1922), the court stated:

. . . neither through billing, uninterrupted movement, continuous possession by the carrier, nor unbroken bulk, is an essential of a through interstate shipment. These are common incidents of a through shipment; and when the intention with which a shipment was made is in issue, the presence or absence, of one or all of these incidents may be important evidence bearing upon that question. But where it is admitted that the shipment made to the ultimate destination has at all times been intended, these incidents are without legal significance as bearing on the character of the traffic

In sum, it is the shipper's fixed and continuing intent that governs the character of the movement. The cases interpreting this principle illustrate a gradual broadening of the definition of interstate commerce. While qualifications of this principle are too numerous to treat adequately herein, the following cases illustrate the evolution of the case law in this area.

  1. Private barge movement into a state, and then an inland movement between two points in the same state by rail, was held to be intrastate commerce. Pennsylvania R.R. Co. v. Ohio Public Utilities Commission, 298 U.S. 170 (1936).
  2. Temporary storage or warehousing does not, alone, deprive goods of their interstate character. Texas & New Orleans R.R. v. Sabine Tram Co., supra, Standard Oil Co. v. Federal Trade Commission, 340 U.S. 231 (1951), J.W. Cartage Co. Ext-Twine, 81 M.C.C. 167 (1961).
  3. A fairly constant demand for product which may be accurately estimated may be sufficient to establish a fixed and continuing intent. Standard Oil Co. v. Federal Trade Commission, supra.
  4. Where product comes to rest for indefinite periods before reshipping, it is further processed and is sold from that point, the subsequent movement is intrastate. Petroleum Products Within A Single State, 71 M.C.C. 17 (1957).
  5. The bill of lading contracts used on an intermodal movement may be some evidence of the nature of the shipment, but such forms are not controlling. Southern States Cooperative, Inc. v. B. & O.R.R., 323 I.C.C. 400, 403 (1964).
  6. Shipments of hardware articles from a port to inland destinations within the same state are interstate where the shipper intended their ultimate distribution to its inland stores from the beginning. The shipper's computerized inventory control at the storage point was construed to mean that the ultimate destinations of the imported articles was determined from the time the goods were imported. It is not sufficient to show that some items did not have a destination designated prior to their arrival at the port. Iron & Steel Articles, Wilmington to Points in North Carolina, 323 I.C.C. 740 (1965).
  7. Following a private truck movement interstate, a further truck movement by for-hire common carrier within that state was held to be intrastate commerce. Motor Transportation of Property Within Single State, 94 M.C.C. 541 (1964), aff'd, sub. nom. Pennsylvania R.R. Co. v. United States, 242 F.Supp. 890 (E.D. Pa. 1965).
  8. A continuing intent may be established by the fact that consignees are known in advance and are bound to accept monthly quotas; the only uncertainty being the ultimate delivery date. Petroleum Transit Co., Inc. Ext.—Wilmington, N.C., 102 M.C.C. 380 (1966).
  9. Exempt bulk barge movement into a state, stored and then moved by truck held intrastate. Behnken Truck Service, Inc., Ext.-Exbarge Traffic, 103 M.C.C. 787 (1967), Commercial Carrier Corp. Ext.-Salt, 112 M.C.C. 415 (1970).
  10. Rail movements of bananas from a California port to inland points in California were held to be in foreign commerce because of the clear intent of the shipper to move the bananas beyond the coastal port. Long Beach Banana Distributors, Inc. v. Atchison, Topeka & Santa Fe Ry. Co., 407 F.2d 1173 (9th Cir. 1969). The I.C.C. had jurisdiction despite the fact that the inbound movement was in private water carriage, and some of the bananas were unsold and loaded into rail cars to be sold in transit.
  11. Despite a “temporary stoppage,” motion picture films distributed within a state were deemed in interstate commerce when the intent was that they would be used by the exhibitors and moved by the carrier as continuously as possible. Feature Film Service, Inc. v. United States, 349 F.Supp. 191 (S.D. Ind. 1972).
  12. The fact that an interstate movement is subject to rail transit privileges for possible out-of-state movement beyond the warehouse does not alone transform the intrastate move from plant to warehouse into interstate commerce. Southern Pacific Transp. Co. v. I.C.C, 565 F.2d 615 (9th Cir. 1977). The fact that most of the goods eventually were shipped out of state was not deemed controlling on the issue of a fixed intent at the original movement.

Since the mid-1980's, there have been a number of significant cases which substantially broadened the definition of “interstate” commerce. These cases generally involve the flow of goods through a warehousing or distribution point, where the goods temporarily come to rest, and are then delivered to final destinations.

  1. Armstrong World Industries: The 1986 decision of the I.C.C. in Armstrong World Indust., Inc., Transportation Within Texas, 2 I.C.C. 2d 63, 69 (1986), aff'd sub nom., State of Texas v. United States, 866 F.2d 1546 (5th Cir. 1989) involved a petition for declaratory order by a shipper (E&B Carpet Mills, a division of Armstrong) to determine whether certain transportation within Texas was interstate or intrastate in nature. Reeves Transportation Company of Georgia joined in the petition, and a number of trucking companies and state regulatory commissions became involved in the case. The reason for the petition was that the interstate rates were lower than the local intrastate rates for the segment of the movement within Texas, and a jurisdictional dispute had arisen between the Texas Railroad Commission and Reeves, which was transporting shipments for E&B at its lower interstate tariff rates.
  2. Armstrong involved carpet which was manufactured in Georgia or Tennessee and shipped to a service center at Arlington, Texas, from which most of it was reshipped to retail customers in Texas. The specific issue was:
. . . whether the movements of non-sidemarked carpet from Arlington to other Texas points are interstate or intrastate in naturefn1
fn1 Sidemarking designates the customer to whom the carpet will eventually be shipped and is indicated on the roll of carpet by a tag and also on the freight documents. 2 I.C.C. 2d at 64
  1. The Commission held the movements to be interstate in nature, specifically relying on storage-in-transit provisions in the carriers' filed tariffs.
  2. The Texas Railroad Commission challenged the I.C.C.'s decision in Armstrong, appealing to the Fifth Circuit. The court reviewed the I.C.C.'s jurisdiction and its reasoning and affirmed, in State of Texas v. United States, 866 F.2d 1546 (5th Cir. 1989)
  3. Matlack: The 1987 decision of the I.C.C. in Matlack, Inc.—Transportation Within Missouri—Petition for Declaratory Order, No. MC-C-10999, 1987 Fed. Carr. Cas. (CCH) 37,360 (June 1, 1987) also dealt with the interstate vs. intrastate issue. In that case, chemicals moved in bulk from points outside Missouri by barge, rail and motor carrier to a St. Louis distribution center. The I.C.C. held that the subsequent movements from the distribution center to customers in the state of Missouri were interstate in nature.
  4. Quaker Oats: In Quaker Oats Co. - Transp. within TX & CA, 4 I.C.C. 2d 1033 (1987), the I.C.C. again considered whether certain transportation movements were interstate or intrastate in nature. Similar to Armstrong, Quaker Oats shipped product from manufacturing facilities to warehouses or distribution centers, from which the goods were distributed, and the issue was whether the intrastate segment of the movement was subject to state regulation. The I.C.C. held that it was not, and that the transportation was “interstate” in nature.
  5. The Commission's decision and declaratory order in Quaker Oats was also challenged, in this case, by the California Trucking Association. California Trucking Association, et. al. v. I.C.C, 900 F.2d 208 (9th Cir. 1990). The Ninth Circuit rejected arguments that the I.C.C. lacked jurisdiction to determine whether the transportation was “intrastate” or “interstate”, and that its decision was arbitrary or capricious, and denied the petitions for review.
  6. Teamsters: The interstate vs. intrastate issue was also the subject of the Ninth Circuit's decision in Int'l Brotherhood of Teamsters v. I.C.C., 921 F.2d 904 (9th Cir. 1990). This involved an appeal of an I.C.C. declaratory order which determined that the distribution of paper products from a distribution center in Woodland, California was “interstate” in character. The court in Teamsters found that “the I.C.C. examined all the relevant circumstances and concluded that JRC at the time of its shipment to the Woodland Center in California intended the shipped goods to move in interstate commerce continuously until they reached JRC's California customers.”
  7. There was one additional issue not present in the earlier cases: whether goods shipped from a point in one state to a point in the same state may remain in interstate commerce even where an exempt movement of the goods precedes the single-state movement. In the particular situation, some of the inbound movements to the California distribution center came by rail boxcar or trailer-on-flatcar shipments which had been exempted from economic regulation by the I.C.C. pursuant to 49 U.S.C.  10505 (Appendix 10). The court held the single-state segment to be interstate, notwithstanding the prior exempt movement.
  8. I.C.C. Policy Statement—MC-207: The I.C.C.'s Policy Statement—Motor Carrier Interstate Transportation—From Out-of-State Through Warehouses to Points in Same State, Ex Parte MC-207, 8 I.C.C. 2d 470 (1992) was an effort by the Commission to issue guidelines and criteria for determining whether certain traffic is interstate or intrastate. It basically summarizes the results of the I.C.C.'s decisions in cases such as Armstrong and Quaker Oats.
  9. Merchants: Merchants Fast Motor Lines, Inc. v. I.C.C, 5 F.3d 911 (5th Cir. 1993) was essentially a continuation of the jurisdictional dispute between the Railroad Commission of Texas and the I.C.C. which was involved in Armstrong. The case dealt with shipments of merchandise moving by for-hire carriage from points outside Texas to warehouse or distribution centers located in Texas. The shippers temporarily stored the merchandise in Texas warehouses and then shipped the merchandise to Texas destinations by carriers with interstate authority. The I.C.C. concluded that the Texas leg of the transportation was interstate, because it was the shipper's intent to move the goods continuously in interstate commerce.
  10. For the purposes of this text, however, it is sufficient to note that if the determination is made that the claim arose on an “interstate or foreign commerce” movement, the carrier's liability will be governed by the appropriate section of the Interstate Commerce Act. If it is an intrastate movement, it will be governed by state law.

Question: On pool-truck distribution loads, where the consignees are known and each carton is stenciled with their respective names, addresses and codes, does the issuance of separate bills of lading from the distribution point of the ultimate destination in the same state change the distribution movement into an intrastate move?

Answer: No. The intent of the shipper at the time of movement was that each carton move directly to the intended consignees. Execution of multiple bills of lading does not change that intent.

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