INTERSTATE OR INTRASTATE

INTERSTATE OR INTRASTATE--SO WHAT?

Reproduced with the Permission of Miles L. Kavaller

When a shipment is deemed to be in intrastate commerce, rather than in interstate commerce, it can have significant implications. Consider the following: The carrier and shipper have entered into a contract for intrastate transportation which was filed with the California Public Utilities Commission as required by state law. (Under 49 U.S.C.  14501, as of January 1, 1996, federal law preempts state regulation and eliminates regulation by the California Public Utilities Commission over motor carrier rates, routes and services.) The contract contains a provision limiting the carrier's liability to $2.50 per pound. The shipper receives a container from overseas which it temporarily stores in a local warehouse which is then to be delivered to customers/consignees in Southern California. During transit, the shipment is stolen. The shipper's claim is met with the carrier's settlement offer of $2.50 per pound, far less than the actual value of the shipment. If the shipment is characterized as intrastate, the limitation will be enforceable and the shipper can recover no more than $2.50 per pound. On the other hand, if the shipment is characterized as being in interstate commerce, it will be subject to the "actual loss" provision of the Carmack Amendment.

If you concluded that the shipment was intrastate and the carrier's liability limitation was all the shipper could get, think again. The federal 11th Circuit Court of Appeals decided Swift Textiles, Inc. v. Watkins Motor Lines, Inc., 799 F.2d 697, 701 (11th Cir. 1986), cert. denied, 480 U.S. 935 (1987) differently. There, an import shipment by sea was consigned to the purchaser's customs broker in Savannah, Georgia and was then transferred to a motor carrier in Savannah for transportation to LaGrange, Georgia. Damage occurred during the intrastate portion of the transportation and the consignee argued that since a separate bill of lading had been issued for the motor carriage from Savannah to LaGrange, the shipment was entirely intrastate and the Carmack Amendment was inapplicable. The 11th Circuit Court of Appeals rejected this argument stating that it was inconsistent with the judicial decisions that focused on the intent of the parties at the inception of the shipment which determines whether a shipment is in interstate or intrastate commerce. "Thus, the critical inquiry is not whether the domestic leg of the shipment crossed a state border but rather it is whether the domestic leg of the shipment was intended to be a part of a larger shipment originating in a foreign country."