The statement of facts, conclusions, and findings of Administrative Law Judge George A. Dahan, follows: By complaint filed September 8, 1975, the complainant corporation alleges that the rates charged by defendants, Florida East Coast Railway Company, Southern Railway Company, and Seaboard Coast Line Railroad Company on numerous carloads of reject or waste woodpulp principally from Jesup, Doctortown, and Rosser, Ga., to Pompano Beach, Fla., and from Pompano Beach, and Fernandina Beach, Fla., Jesup, Doctortown, and Rosser to Beech Island, S.C.,1 during the 3-year period prior to September 8, 1975, were and are inapplicable and unjust and unreasonable in violation of sections 1 and 6 of the Interstate Commerce Act. The complainant seeks reparations and the prescription of just and reasonable classifications, rates, and charges. The matter of this complaint is being handled under the Commission's modified procedure. The parties have filed their statements of facts and arguments as directed by the Commission. Counsel for complainant objects to exhibit No. 4 of witness Ernest E. Royals for defendants. The exhibit is rejected and all testimony relating thereto is stricken. In all other respects the verified testimonies and exhibits of all witnesses are received in evidence. The complainant is engaged in the business of buying and selling wastepaper. It also buys and sells reject or waste woodpulp. The bulk of its reject or waste woodpulp is from the mills of ITT Rayonnier, Inc., at Jesup (shipping points include Doctortown and Rosser) and Fernandina Beach. Its shipments from these plants are consigned either to its plant at Pompano Beach or to its customers, principally Kimberly-Clark Corporation at Beech Island. At the Fernandina Beach plant Rayonnier manufacturers two classes of woodpulp, (1) a dissolving or cellulose woodpulp used to make rayons, acetates and cellophane, etcetera, and (2) extracting or paper pulp grades used to make disposable tissues, etcetera. The process used is the sulphite or ammonia based cooking method. The paper pulp sulfite grades look like thick white blotter paper. They are sold either in sheets 33 by 30 inches or in rolls which measure 36 inches in diameter and from 15 to 30 inches in width. The sheets are baled for shipment. At the Jesup plant Rayonnier produces sulphate or Kraft wood pulp using a caustic soda based process. This plant produces 33 grades of woodpulp used primarily for the production of paper and paper products. The complainant does not buy pulp by grade. It buys "reject or waste" woodpulp called "broke," which Rayonnier cannot or will not sell to its regular customers. The word "broke" is a word peculiar to the paper and pulp industry, probably derived from the fact that when sheets of paper or pulp are being finished and placed on rolls they sometimes break. This is a principal source of finishing room "broke." The broken sheet rolls on to the floor and picks up dirt, oil, and other contaminants. There is no way to replace the torn sheet on the roll. With time all material produced in a paper or pulp mill which did not conform to customer specifications came to be called "broke." The material purchased by complainant is (1) finishing room "broke" which is trim from rolls, floor sweepings, and bales made from the ends of jumbo rolls; (2) machine room "broke" consisting of broken sheets piled on the floor; and (3) cullrolls where the size did not meet specifications, end rolls with insufficient material, “dished" or concave rolls, and "horse collar" or convex rolls. The material is shipped either to complainant's plant at Pompano Beach or direct to complainant's customer. The complainant's evidence included 13 invoices covering its sales to Kimberly-Clark. The four invoices in August and September 1974, described the material as "white sulphite cuttings," unprinted bleach kraft for recycling, "white bleached cuttings," and "test air dry 101.58%." The nine invoices in December 1974 and January 1975, described the material as "reject pulp bales for recycling," "reject pulp rolls for recycling," or "reject for recycling cullrolls." The 13 shipments ranged in weight from 47,800 to 116,700 pounds and averaged 80,600 pounds. With the exception of the "test air dry 101.58%" shipment which was priced at $380 a ton, the August and September 1974 shipments were priced at $305 a ton. This price is compared by complainant with an invoiced price of $275 a ton on two shipments of “manila tab cards for recycling” (a higher grade paper stock) in 1 Other origins are Miami and Auburndale, Fla., and Savannah, Ga., and other destinations are Augusta, Ga., Miami, Fla., Kalamazoo, Mich., Memphis, Tenn., and Cohoes, N.Y. September and October 1974. The December and January shipments of pulp were invoiced at prices of $290 a ton in December 1974 and $275 a ton in January 1975. The "Official Board Markets" a weekly publication listing paper stock and pulp prices based on transactions for the week shows that in the first and second weeks of December 1974, and the second week in January 1975, scrap paper prices in the South ranged from $10 a ton for No. 1 mixed to $210 a ton for hard white envelope cuts and manila tab cards. During the same period domestic pulp prices in the South ranged from $310 a ton for unbleached softwood sulphate to $340 a ton for bleached softwood sulphate. The complainant acknowledges that reject or waste woodpulp is woodpulp and that scrap or waste paper is paper. It contends, however that the commodity rates on scrap or waste paper are applicable on reject or waste woodpulp because the classification carload ratings on scrap or waste paper also apply on any article "made of woodpulp, loose or in packages, being shipped to a mill for recycling." This contention is untenable. Woodpulp is the most important papermaking material. It is not paper. Pieces of woodpulp whether they are trim, culls, rejects, or waste are not articles of woodpulp, but are woodpulp. The classification carload ratings on scrap and waste paper as scrap pulpboard made from mixed scrap paper and mechanical woodpulp, scrap jute board made from kraft pulp, and glassine made from sulfite pulp.2 The so-called "broke" involved here is not an article made from woodpulp, but is a material on which the commodity rates charged are applicable. The complainant's evidence on the issue of reasonableness is aimed to show that the transportation characteristics of the reject pulp it ships are somewhat the same as the transportation characteristics of the highest grade of scrap paper it ships and that both articles are raw materials used by the same paper manufacturer for the making of the same paper. This is not enough. Essential evidence in support of complainant's position is totally absent. Generally speaking all grades of a commodity are rated at the same basis, the rate being one which would be too high for the cheaper grades and too low for the more expensive ones were it reasonable to rate them separately. This is particularly true of complainant's scrap or waste papers. The same rate apply on its lowest grades of scrap or waste paper as on its highest grade. If nothing else, there is a very wide difference in value between the lowest and highest grades of scrap or waste paper. There is no evidence that a similar range in values exist between the lowest and highest grades of reject pulp. Of significance for a determination of the issue here and disregarded by complainant are the differences if any, in value and use of the normal and reject condition of woodpulp. The commercial value or use of articles shipped is accorded primary consideration as a means of distinguishing between articles in their original or scrap condition for ratemaking purposes. Apex Smelting Co. v. New York Central R. Co., 292 I.C.C. 17, 19. I find that the rates charged on complainant's shipments of woodpulp are applicable and have not been shown to be unjust and unreasonable. I further find that this decision does not constitute a major Federal action significantly affecting the human environment within the meaning of the National Environmental Policy Act of 1969. It is ordered, That this complaint be, and it is hereby, dismissed, and that in the absence of a stay or postponement by the Commission or the timely filing of exceptions, the effective date of this order shall be 30 days from the date of service hereof. Dated at Washington D.C., this 4th day of March 1976. 2 Materials Handbook, Tenth Edition 1971, George S. Brady, McGraw-Hill Book Company. 357 I.C.C. No. 36501 FIBREBOARD OR PULPBOARD, MONTANA Decided July 27, 1977 Tariff change canceling commodity rates on pulpboard and fibreboard from Schilling, Mont., to points in California via Silver Bow or Butte, Mont., found not shown to be just and reasonable. Cancellation of route via Silver Bow or Butte not shown to be in the public interest under section 15(3). Schedules ordered canceled and proceeding discontinued. W. P. Higgins and A. R. Post for respondent, Union Pacific Railroad. William Q. Keenan and Frederick A. Muth, Jr. for protestant, Hoerner Waldorf Corporation. REPORT AND ORDER OF THE COMMISSION DIVISION 2, COMMISSIONERS HARDIN, MURPHY, and Clapp BY DIVISION 2: The modified procedure was followed. Due and timely execution of our functions as provided for by section 17(9)(b) of the Interstate Commerce Act imperatively and unavoidably requires the omission of an initial decision in this proceeding. Requested findings not specifically discussed in this report nor reflected in our findings or conclusions have been considered and found not justified. By schedules proposed to become effective December 31, 1976 the Union Pacific Railroad (UP or respondent) proposed to cancel from Pacific Southcoast Freight Bureau Tariff 2-0, I.C.C. 1923, certain commodity rates' on pulpboard and fibreboard which applied via the Silver Bow or Butte, Mont., route from Schilling, Mont., to points in California. Hoerner Waldorf Paper Company (Hoerner Waldorf, protestant, or shipper) protested the proposal and petitioned for suspension. The schedules were not suspended; however, division 2, by order 'Unless otherwise indicated, rates and costs are stated per 100 pounds. dated December 30, 1976, instituted this investigation into the lawfulness of the rates, charges, rules and regulation contained in the schedules. In the same order the division found that virtually all of the traffic under consideration moves by rail carriers which have participated in rate bureau discussion, consideration, approval, or publication of the rates in question. It further found that the higher class and combination rates which became effective upon the cancellation of the pulpboard commodity rates over Silver Bow exceed the variable cost of service by 180 to 205 percent, and that significant diversion to another carrier or modes of transportation does not appear to be a viable alternative to protestant. It, therefore, found that the UP has market dominance over the traffic which is the subject of this proceeding. By order serviced Feburary 3, 1977, it directed that this matter be handled under modified procedure. Since the cancellation of these pulpboard commodity rates changes the rates via Silver Bow, the burden is on respondent to show that the cancellation is just and reasonable. We note, however, that a prior finding of market dominance does not create a presumption that the cancellation results in rates that exceed a just maximum. Evidence in support of the schedules was submitted by respondent. Evidence in opposition was submitted by protestant. Respondent replied. THE FACTS This proceeding arises out of a dispute between Hoerner Waldorf and the UP. Hoerner Waldorf, a division of Champion International Corporation, owns and operates a paper mill at Schilling, Mont., approximately 12 miles west of Missoula, Mont., where it is engaged in the manufacture and shipment of pulpboard, not corrugated or indented, STCC 26-311-16. Its mill at Schilling began operation in 1957 with a pulping capacity of 250 tons per day. By 1960, the mill had the capacity to produce 350 tons of pulpboard daily and additional expansion in 1966 brought the Schilling mill up to a capacity of 1,000 tons daily. In 1967, Hoerner Waldorf purchased two corrugated box plants in southern California located at Fullerton and Salinas, together requiring annually 55,000 tons of the type of pulpboard produced at Schilling. In August of 1976 Hoerner Waldorf filed a formal complaint before this Commission in docket No. 36418, Hoerner Waldorf Corporation v. Union Pacific Railroad Company, asking that its Schilling mill be granted pulpboard rate parity with its competitors in the Northwest on shipments to California. Using its route over the UP via Silver Bow or Butte, Mont., to California destinations, Hoerner Waldorf, in its opening statement in docket No. 36418, offered evidence showing that the rail distance from its competitors' mills was significantly longer in some instances than the rail distance from Schilling to the same California locations, yet the freight rates were lower for these competitors. Following the filing of this statement on October 12, 1976, the UP by independent notice dated October 26, 1976, withdrew its participation in pulpboard and fibreboard commodity rates via the shorter Silver Bow-Butte route from Schilling, Mont., to California destinations, including 'protestant's plant at Fullerton, Calif., effective December 31, 1976.2 The UP cited lack of use of the route as its reason for closing it. Hoerner Waldorf protests the commercial closing of its Silver Bow route, arguing that the resulting rates are unjust and unreasonable in violation of section 1(5) of the Interstate Commerce Act (the act), that they subject it to an undue and unreasonable prejudice and disadvantage in violation of section 3(1) of the act, and that the route closing fails to meet the standards set forth in section 15(3) of the act, as recently amended. We have carefully reviewed all of the pleadings of the parties filed in every stage of this proceeding, and a summary of their positions is attached as appendix A to this report. It should be noted that the report and order of Review Board No. 4 in docket No. 36418, supra, was served on July 13, 1977. In its report the review board found that the rates on pulpboard from Schilling, Mont., to California destinations had not been shown to be unjust and unreasonable, unduly prejudicial to complainant and preferential to Pacific Northcoast pulpboard producers or otherwise unlawful. DISCUSSION AND CONCLUSIONS Before the merits of the arguments are reached, certain procedural matters should be disposed of. The motions to strike. In its reply statement, respondent moves to strike the statement of a cost witness for protestant on the grounds that it is incomplete and unverified. We note that, as protestant points out, this same statement was introduced by Hoerner Waldorf in docket No. 36418, supra, to which respondent, 'Pacific Southcoast Freight Bureau Tariff 2-0, I.C.C. 1923, supplement 63, item 4705-A. |