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Moore on Pricing Part 2: The pallet classification debate

Editors Note: Peter Moore’s November column titled "What’s the CCSB doing now"? stirred quite a bit of reaction from carriers, analysts, as well the Commodity Classification Standards Board (CCSB). This month Logistics Management also offers as a response from Joel Ringer, chairman of the CCSB.
By Peter Moore, Partner at Supply Chain Visions
January 01, 2013

CCSB responds to Moore’s clarification
The Commodity Classification Standards Board (CCSB) has received a number of inquiries from users of the National Motor Freight Classification (NMFC) regarding Peter Moore’s column in the November 2012 issue of Logistics Management (What’s the CCSB doing now?). These inquiries relate to the suggestion by Mr. Moore that a recent CCSB action to reclassify pallets has resulted in a far-reaching change to the classification of palletized freight and the information shippers of palletized freight must show on bills of lading.

Subject 10 of CCSB Docket 2012-3 was a proposal to amend NMFC item 150390, which names “Pallets; Platforms; Racks, shipping, NOI; or Skids; for lift trucks, steel or wood,” by assigning classes based on density. The CCSB’s action on this subject changed the classes in item 150390, but did not change the articles named in the item, which date back almost 45 years. It also did not change the manner in which palletized freight is classified, or the NMFC rules governing palletized freight.

Item 150390 is listed in the Articles Section of the NMFC, meaning that it applies on steel or wood pallets, shipping racks, etc., when they are the articles, i.e. the commodities, being shipped. In other words, item 150390 applies on shipments of empty—for lack of a better word—steel or wood pallets or shipping racks. This item does not apply, nor has it ever applied, on shipments of other goods tendered on pallets.

In this regard, the class applicable to a given shipment is determined by the article being shipped and the gross weight of the article as tendered for shipment is subject to that class. If the article is packaged in a box, the weight of the box is included in the gross weight—the box is not classified separately. 

Similarly, if the article is secured on a pallet, the weight of the pallet is included in the gross weight—the pallet is not classified separately. On this point, NMFC Item (Rule) 995, Sec. 1, makes it clear that “A shipping carrier, container or package, or pallet, platform… or skid constitutes part of the gross weight.” Subject 10 of Docket 2012-3 did not change the rule.

Where differently classed articles are tendered for shipment on the same pallet, determination of the applicable class is governed by NMFC Item (Rule) 640, Sec. 3. Paragraph (3) of Sec. 3 (b) does require that the weight of the pallet itself be shown on the bill of lading.

However, as the rule specifically states, “The weight of pallets, platforms, racks, skids, unitizing material or packing devices…will be charged for at the lowest class applicable to any article or articles comprising not less than 5 percent of the weight unitized on such pallet, platform, rack or skid.” 

Accordingly, while the weight of the pallet must be shown, that weight is subject to the class of the lowest-classed article(s) on the pallet (meeting the 5-percent minimum); it is not subject to item 150390. Subject 10 of Docket 2012-3 did not change this rule either.

Mr. Moore has done the readers of Logistics Management a great disservice by misleading them into believing that shippers, when tendering goods on pallets, will now have to treat the pallets “as a commodity with full separate description on the Bill of Lading,” and that “many [shippers] will need to make a quick scramble to re-program their transportation management systems.”
 
Fact is that the only shippers potentially impacted by the CCSB’s approval of Subject 10 of Docket 2012-3 are those that ship empty steel or wood pallets or shipping racks as named in item 150390.

Again, the proposal amended only the classification provisions that apply when the commodities being shipped are steel or wood pallets, shipping racks, etc.

Mr. Moore’s subsequent “clarification” of his November column only compounds the problem by restating the same errors and inaccuracies, and then having Bill Pugh, as a former National Motor Freight
Traffic Association employee, try to legitimize them. According to Mr. Pugh, the reclassification of pallets will, or at least could, affect the classification of palletized freight because:
• Used pallets are no longer “exempt” commodities excluded from the NMFC.
• The amendment of item 150390 could affect the application of Item (Rule) 640 in determining the class of freight on pallets.
• The description of item 150390 does not explicitly restrict application of the item to empty pallets.

None of these points are valid. The change in exempt status of used pallets is totally irrelevant. The exemption to which Mr. Pugh refers applied only on shipments of empty, used pallets. Shipments of goods loaded on used pallets—what he calls “loaded pallets” —were not covered by the exemption unless the goods that were shipped on the pallets were themselves exempt. 

Mr. Pugh is wrong in suggesting that the amendment of item 150390 could change how palletized freight is classified under Item (Rule) 640. As already mentioned, pursuant to Sec. 3 (b), Paragraph (3) of the rule, when differently classed articles are shipped together on the same pallet the weight of the pallet is subject to the class of the lowest-classed article(s) comprising at least 5 percent of the weight on the pallet. The class of the pallet itself never comes into play, regardless of whether it’s higher or lower. So item 150390 is a non-factor.

And the fact that item 150390, as amended, does not expressly state that its application is limited to empty pallets does not alter how the item is to be applied. The previous provisions of item 150390 did not contain such a qualification, and the CCSB is unaware of anyone ever attempting to misapply them to palletized freight. 

Indeed, the classification provisions for fiberboard boxes are not explicitly restricted to empty boxes, yet we haven’t heard of anyone attempting to misapply those provisions to shipments of boxed freight.

Items in the Articles Section of the NMFC apply on the articles (the commodities) they name. To apply item 150390 as Mr. Moore (or Mr. Pugh) suggests would fly in the face of decades of accepted classification practice, and constitute a strained and unnatural application of the provisions.

The CCSB has heard from a number of shippers and carriers who have read, or been told about, Mr. Moore’s column and have been left confused or dismayed by it. The common thread in the inquiries we’ve received is the misimpression, created by Mr. Moore, that there has been a change in the rules governing the classification of freight on pallets. 

We are only too pleased to assist those who contact us in order to set the record straight.  Indeed, we invite anyone who has questions in this regard to get in touch with the CCSB at 703-838-1810 or .(JavaScript must be enabled to view this email address) so that we may clear up any further misconceptions they might have.

Joel L. Ringer, Chairman
Commodity Classification Standards Board
703-838-1826 or .(JavaScript must be enabled to view this email address)

About the Author

Peter Moore
Partner at Supply Chain Visions

Peter Moore is a partner at Supply Chain Visions, Member of the Program Faculty at the University of Tennessee Center for Executive Education and Adjunct professor at The University of South Carolina Beaufort.  Peter can be reached at .(JavaScript must be enabled to view this email address)


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