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American Cylinder Manufacturers Committee v. Department of Transportation

decided: April 28, 1978.


Plaintiff appeals a decision of the United States District Court for the Southern District of New York, Honorable Milton Pollack, Judge, that the Department of Transportation may lawfully permit foreign manufacturers to test compressed gas cylinders outside the United States without first inviting plaintiff to participate in its decision.

Moore, Smith and Mansfield, Circuit Judges.

Author: Moore

MOORE, Circuit Judge:

Plaintiff, the American Cylinder Manufacturers Committee ("ACMC"), an unincorporated domestic trade association, appeals the district court's decision that defendants, the Department of Transportation ("DOT") and its officials, can grant approval to foreign manufacturers to have compressed gas cylinders analyzed and tested outside the United States without public participation. We affirm.

Since 1922, federal regulations have governed the manufacture and transportation of compressed gas cylinders used in interstate commerce. Initially, the Interstate Commerce Commission enforced the applicable federal regulations. In 1967, the regulatory authority was transferred to the then-newly-created DOT. 49 U.S.C. § 1655. Under the regulations then (and now) in effect, all cylinders used in domestic commerce must be inspected, tested, and chemically analyzed to determine whether they satisfy cylinder specifications designed to ensure the public safety.

Prior to 1976, all cylinders had to be tested and analyzed within the United States (though the rule did not specify who was to perform the tests). This "domestic test and analysis rule", as it came to be known, was intended to protect American citizens against the dangers of cylinders of uncertain "pedigree". 41 Fed.Reg. 18412 (May 4, 1976). Unlike testing and analysis, however, the inspection of cylinders could be performed abroad: high-pressure cylinders had to be inspected by "disinterested inspectors" -- i.e., persons not employed by the manufacturer; low-pressure cylinders could be inspected by employees of the manufacturer.

In 1971, the Material Transportation Bureau, an agency of DOT authorized to promulgate regulations in this area, initiated rule-making proceedings by publication of notice, 36 Fed.Reg. 838 (Jan. 19, 1971), to the effect that a change in the "domestic test rule" was being contemplated. In 1976, after extensive proceedings in which ACMC actively participated, a new rule was promulgated. The rule allows DOT-approved foreign manufacturers to test and analyze their cylinders outside of the United States. In addition, the rule requires that domestically-made high-pressure cylinders and foreign-made high-and low-pressure cylinders be subjected to inspection by DOT-approved independent inspection agencies. Thus, under the post-1976 rules, all -- not just high-pressure -- foreign-made cylinders, are subject to independent inspection, and independent inspectors, both foreign and domestic, must be approved by DOT. 49 C.F.R. § 173.300a; 41 Fed.Reg. 18414.

Under the new regulations, a foreign manufacturer seeking to conduct tests and analyses outside the United States must submit detailed information concerning its facilities and its cylinders, and it must identify its independent inspection agency, permit inspection of its manufacturing and testing facilities, and provide materials for independent analyses and tests upon request. If, on the basis of such information and investigation, DOT determines that the manufacturer can satisfy performance standards, then approval will be granted. 49 C.F.R. § 173.300b; 41 Fed.Reg. 18413. Application for approval by both inspectors and manufacturers is made to the Office of Hazardous Materials Operations ("OHMO"), a subagency of DOT charged with enforcing the regulations for the transportation of hazardous materials.

Pursuant to the 1976 amendments and the procedures promulgated thereunder, 49 C.F.R. § 173.300a and b, OHMO, on August 31, 1977, issued an "approval" for non-domestic testing and analysis to Engineering Products of Canada, Ltd. ("EPC"), a Canadian manufacturer of gas cylinders, and an "approval" to Warnock Hersey Professional Services, Ltd., EPC's independent inspection agency. In September 1977, OHMO issued approvals to another manufacturer and its independent inspection agency. OHMO is presently considering applications for other approvals. This has led to the instant suit.

ACMC brought this action seeking declaratory and injunctive relief: it asks that the approval of EPC's nondomestic testing, and all similar approvals of foreign manufacturers and inspection agencies, be declared void; and that DOT be enjoined from issuing any further approvals unless notice and an opportunity for public comment is first provided. After a trial on the merits, District Judge Pollack denied relief, finding that neither notice nor a hearing was required under the Administrative Procedure Act, 5 U.S.C. § 558(c), or under the Hazardous Materials Transportation Act of 1974 ("HMTA"), 49 U.S.C. § 1801 et seq., DOT's enabling statute.

On appeal, ACMC argues that DOT approvals are, in effect, "licenses" to analyze, test, or inspect cylinders outside of the United States. These "licenses", it is contended, serve to enforce compliance with DOT's safety regulations and are, therefore, like compliance orders, the issuance of which, under 49 U.S.C. § 1808(a), must be preceded by notice and an opportunity for public comment. ACMC argues that, though the approval or license procedures may have been validly enacted under DOT's rule-making authority, HMTA § 1804(a), the implementation of the procedures can only be justified under § 1808(a), which as noted, requires an opportunity for public comment before a compliance order is issued.

As did the district court, we assume ACMC's standing to raise its claims, though it is somewhat doubtful that ACMC's status as a competitor of the foreign manufacturers constitutes a sufficient predicate on which its standing can be upheld. Assuming standing, however, we affirm on the merits.

We reject ACMC's contention that, if the approval procedure is valid at all, it is only so under § 1808(a). As the district court noted, § 1808(a), which is reproduced in the margin,*fn1 deals only with "orders directing compliance", which are intended as a sanction for past violations of DOT regulations. DOT decisions to grant or withhold approvals, on the other hand, involve determinations whether cylinder specifications can be met in the first instance. They are, in effect, mechanisms designed to effectuate the safety standards promulgated by DOT. Thus, they do not fall within the ambit of § 1808(a).

We disagree with appellant's contention that the procedures now contested cannot be justified under DOT's general rule-making powers granted in § 1804(a),*fn2 for, as we see it, the procedures reflect merely a method for policing the regulations lawfully adopted under that provision. We believe that ACMC's repeated claims ...

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