Does the Maryland Port Administration have to go through formal rulemaking before it can raise its tariff of charges at marine terminals?

Plain-English summary

A tenant at one of the Maryland Port Administration's (MPA) marine terminals, Maryland Undercoating Co., protested a tariff increase as arbitrary and asked the Department of Transportation's Board of Review to force the MPA to follow the rulemaking procedures of the Maryland Administrative Procedure Act (APA), plus the publication requirements of the State Documents Law, before the new charges could take effect. The Board of Review asked the Attorney General whether the MPA's tariff was a "rule" under the APA at all, and if so, whether federal law preempted state rulemaking requirements anyway. The opinion concluded that an MPA tariff for marine terminal services is not a "rule" within the meaning of the APA. First, the tariff was proprietary price-setting, the MPA acting as a commercial proprietor pricing its own goods and services in a competitive market, which the opinion read as outside the APA's rulemaking definition even though the statutory text does not say so expressly. Second, and independently, the MPA's own legislative history (it succeeded an agency with recognized "fiscal autonomy") and the existence of a detailed federal tariff-filing and review scheme under the Shipping Act of 1916, administered by the Federal Maritime Commission, persuaded the Attorney General that the General Assembly never intended to layer state rulemaking on top of that federal process.

Currency note

This opinion was issued in 1983. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Did the Maryland Port Administration have to publish and take public comment before raising its terminal fees in 1983?
No, according to this opinion. The Attorney General concluded that an MPA tariff was proprietary price-setting rather than a "rule" under the Administrative Procedure Act, so the APA's rulemaking and publication requirements did not apply to it.

Why did the Attorney General treat a government agency's price list differently from a regulation?
The opinion reasoned that the APA's rulemaking process was meant for regulatory policymaking directed at the public, not for a state agency behaving like a market participant that has to price its own services competitively. It cited a similar exclusion for "public property" and "contracts" from the analogous federal Administrative Procedure Act, and warned that applying rulemaking to every agency price change (the opinion gave the example of cafeteria prices) would be unworkable.

Did federal law also play a role in the decision?
Yes. The opinion noted that MPA marine terminal tariffs were separately filed with and subject to review by the Federal Maritime Commission under the Shipping Act of 1916. The Attorney General concluded that the General Assembly, aware of that existing federal oversight, likely did not intend to impose an additional, largely duplicative state rulemaking process on top of it.

Was this conclusion certain, or did the Attorney General flag any doubt?
The opinion itself acknowledged its conclusions were "not altogether free from doubt" and recommended that the General Assembly consider clarifying the law on both proprietary price-setting generally and MPA tariff-setting specifically.

Background and statutory framework

The Maryland Port Administration set a new Terminal Services Tariff (No. 6) for its marine terminals in late 1982, filing it with the Federal Maritime Commission as federal law required. A tenant under a month-to-month lease at the MPA's Dundalk Terminal, Maryland Undercoating Co., protested the increase to the Department of Transportation's Board of Review as arbitrary and discriminatory, and asked the Board to direct the MPA to rescind the increase and comply with the rulemaking requirements of Article 41, §§244 through 247 of the Maryland Code (the APA) and the State Documents Law. The Board of Review asked the Attorney General to resolve whether the tariff was a "rule" at all.

The APA defined "rule" broadly, as "every regulation, standard, guideline, or statement of policy or interpretation of general application and future effect ... adopted by an agency ... to implement or make specific the law enforced or administered by it." The opinion worked through the definition's origins in the 1946 Model State Administrative Procedure Act and noted that, unlike the federal APA (which expressly excludes "public property" and "contracts" matters from rulemaking, 5 U.S.C. §553(a)(2)), the Maryland statute contains no express exclusion for an agency's proprietary price-setting. The opinion nonetheless read such an exclusion into the statute, reasoning that a rulemaking requirement for every proprietary pricing decision would produce absurd results and that the General Assembly likely intended a result comparable to the federal exclusion.

Separately, the opinion traced the MPA's institutional history from its 1956 predecessor, the Maryland Port Authority, which a 1956 opinion of the Attorney General had already found possessed "fiscal autonomy," through the 1970 reorganization that folded it into the Department of Transportation. The 1970 changes removed the agency's independent budget authority but, in the Attorney General's view, did not evidence an intent to newly impose rulemaking on the agency's tariff-setting. The opinion also detailed the Shipping Act of 1916's tariff-filing, complaint, and hearing procedures administered by the Federal Maritime Commission (46 U.S.C. §§816, 817, 820, 821, 822), concluding that this comprehensive federal scheme made a parallel state rulemaking requirement unlikely to have been intended by the legislature. An editor's note appended to the opinion flagged that the APA provisions it construed had since been recodified into the State Government Article.

Citations

Statutes:

• Article 41, §244(c) of the Maryland Code (definition of "rule" under the Maryland APA)
• Article 41, §§244 through 247 of the Maryland Code (APA rulemaking requirements)
• Article 41, §245(c) (distinguishing "rule" from "administrative act")
• §6-204(m) of the Transportation Article (MPA authority to appear before federal agencies)
• 5 U.S.C. §551(4) and §553(a)(2) (federal APA rulemaking definition and public-property/contracts exclusion)
• 46 U.S.C. §§816, 817, 820, 821, 822 (Shipping Act of 1916 tariff-filing and review provisions)
• 46 C.F.R. §§531.10(b)(5) and 536.9(b) (Federal Maritime Commission tariff regulations)
• Chapter 94, Laws of Maryland 1957 (enactment of the Maryland APA); Chapter 2, Laws of Maryland 1956, Extra Session, and former Article 62B, §13(a) (creation of the Maryland Port Authority)

Cases:

• United Parcel Service v. Oregon Transp. Comm'n, 555 P.2d 778, 780 (Or.Ct.App. 1976)
• City of Santa Clara v. Andrus, 572 F.2d 660, 673 (9th Cir. 1978)
• Emma Ah Ho v. Cobb, 617 P.2d 1208, 1212-13 (Hawaii 1980)
• Kindley v. Governor of Maryland, 289 Md. 620, 625 (1981)
• Maryland Port Admin. v. I.T.O. Corp., 40 Md. App. 697, 709 (1978)
• Carroll County Educ. Ass'n v. Board of Educ., 294 Md. 144, 152 (1982)
• Maryland Port Admin. v. SS American Legend, 453 F.Supp. 584, 592 (D.Md. 1978)
• State of California v. United States, 320 U.S. 577, 584 (1944)
• Folgner v. Italian Line, 383 F.Supp. 816, 818 (D.C.Z. 1974)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1983/Volume68_1983.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

Administrative Law, Rulemaking, Maryland Port Administration, Tariffs, Proprietary Price Setting not APA "Rule", MPA Retains Procedural Tariff Setting Autonomy.

May 4, 1983

Mr. John S. Bednarik
Chairman, Board of Review
Department of Transportation

You have requested our opinion concerning the procedure by which the Maryland Port Administration sets the tariff of charges and related terms for the use of its marine terminals. Specifically, you have asked: (1) whether the Port Administration's tariff is a "rule" within the meaning of that term in the Maryland Administrative Procedure Act; and (2) if so, whether application of the rulemaking requirements of the Maryland Administrative Procedure Act is preempted by federal law.

For the reasons given below, we have concluded that a Maryland Port Administration tariff for marine terminal services is not a "rule" within the meaning of the Maryland Administrative Procedure Act, because (i) the definition of "rule" in Article 41, §244(c) of the Maryland Code does not generally apply to the action of a State agency in setting, as a proprietor, prices and related terms for the sale of its own goods or services in a competitive market, and (ii) in light of the particular history of the Port Administration and the federal regulatory presence in this area, the General Assembly more specifically did not intend to impose rulemaking requirements on MPA tariff setting.

I
Factual Background

By letter dated July 27, 1982, the Maryland Port Administration ("MPA") notified the President of the Steamship Trade Association of Baltimore of proposed increases in charges at marine terminals operated by the MPA. These proposed increases were subsequently approved by the Board of Public Works on September 2, 1982.

On September 27, 1982, Terminal Services Tariff No. 6 was issued, published, and filed with the Federal Maritime Commission pursuant to federal law. The tariff, which took effect on October 1, 1982, specified the new charges and other terms under which the MPA provides various services and leases certain land at its marine terminals.

On September 15, 1982, the Maryland Undercoating Co., Inc., a tenant under a month-to-month lease at the MPA's Dundalk Terminal, wrote to the Board of Review of the Department of Transportation to protest the new charges as arbitrary and discriminatory and to ask for their suspension. Subsequently, Maryland Undercoating noted a formal appeal to the Board. It requested that the Board direct the MPA to rescind the increases and to comply with the rulemaking requirements of the Maryland Administrative Procedure Act ("APA") [Article 41, §§244 through 247 of the Maryland Code] and the notice and publication requirements of the State Documents Law [Article 41, §§1 et seq.].

II
Whether the MPA Tariff Is a "Rule" Under the APA

The APA defines "rule" as follows:

"'Rule' includes every regulation, standard, guideline, or statement of policy or interpretation of general application and future effect, including the amendment or repeal thereof, adopted by an agency, whether with or without prior hearing, to implement or make specific the law enforced or administered by it or to govern its organization, procedure, or the practice before such agency, but does not include regulations concerning only the internal management of the agency and not directly affecting the rights of or procedures available to the public, responses to petitions for adoption of rules issued pursuant to §248 of this article, or declaratory rulings issued pursuant to §250 of this article."

This definition of "rule" was derived from the original Model State Administrative Procedure Act, drafted in 1944 and approved by the National Conference of Commissioners on Uniform State Laws in 1946. Except for minor changes not relevant to the issue here, the statutory definition has remained unchanged since it was enacted by the General Assembly in 1957. See Chapter 94, Laws of Maryland 1957.

Neither the language of the definition nor its legislative history clearly indicates whether the definition is intended to apply to activities of the kind in question here, that is, the setting of proprietary prices for the use of governmentally owned facilities. See 65 Opinions of the Attorney General 396 (1980). However, "[n]ot every administrative action with public consequences is a rule and calling something one does not make it one." United Parcel Service v. Oregon Transp. Comm'n, 555 P.2d 778, 780 (Or.Ct.App. 1976) (construing definition of "rule" under Oregon APA).

Indeed, although the definition of "rule" in the Maryland APA is broad, it is not all-encompassing. State agencies may well perform "administrative acts" that are neither "rules" nor "contested cases." See Article 41, §245(c) (drawing a distinction between a "rule" and an "administrative act" for purposes of reporting increased agency expenditures to the General Assembly). See also 64 Opinions of the Attorney General 208, 213 (1979) (recognizing "administrative action" as distinct from rulemaking). One administrative law commentator has described as follows the difficulty of applying any across-the-board definition of "rule": "[P]recise definition in the abstract is not necessarily desirable, for the same function may well be regarded as rule making for one purpose or in one context and as something else for some other purpose or in another context. Here as elsewhere throughout the law a proper classification requires that both the purpose and the effect of the particular classification be taken into account." K. C. Davis, Administrative Law Treatise.

As Mr. W. Gregory Halpin, the Port Administrator, testified before the Board concerning the MPA's decision making about tariffs: "First of all, we are looking to see if we can generate more money. We start with that idea. Secondly, ... we have available to us the best information we have about what other ports are going to do where tariff charges are comparable. Now, we don't know what the answers are yet. We have to guess, because we can't legally call another port. What do you think everybody is going to do? What's the industry going to do? Are they going to go up ten percent? We discuss it in that area. We look at individual charges." Maryland Undercoating Co. v. Maryland Port Administration, Appeal No. 8201, Proceedings at 184-85 (Dep't of Transp. Bd. of Review, Oct. 27, 1982).

The effect of the tariff is, likewise, the same as that of any comparable change in the price and other terms on which goods, services, or land are made commercially available. To be sure, those who use the MPA's facilities are directly affected by its tariff, and other market participants are indirectly affected by the subsequent rate adjustments of shipping companies and other users. But again, these effects are the ordinary consequence of proprietary price setting. Rather, we believe that the definition should be construed to achieve a result, exclusion of proprietary price setting from rulemaking requirements, that is both reasonable and consistent with analogous federal law.

When the General Assembly enacted the Maryland APA, the federal APA had been in effect for over a decade. The federal statute expressly included, within its definition of "rule", the "prescription for the future of rates, . . . prices, facilities, appliances, services or allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing". 5 U.S.C. §551(4). However, the federal statute then expressly excluded "a matter relating to . . . public property . . . or contracts" from its rulemaking requirements. 5 U.S.C. §553(a)(2). The latter exclusion, made necessary by the all-encompassing definition of "rule", was evidently intended to allow federal agencies to set terms for their goods and services in accordance with market conditions, without the need to initiate cumbersome rulemaking proceedings beforehand. See, e.g., City of Santa Clara v. Andrus, 572 F.2d 660, 673 (9th Cir. 1978) (allocation of electricity from federally owned power plant not subject to rulemaking procedures).

In our view, the General Assembly achieved a comparable result through a different statutory approach. Unlike the federal provision, the Maryland APA contains no express exclusion for proprietary price setting or for matters relating to public property. Nonetheless, we believe that the definition of "rule" in Article 41, §244(c), read in light of its purpose, should not be construed to reach the MPA's tariff, since imposing rulemaking on such price setting would subject the MPA to burdens that neither their federal nor their privately owned counterparts must undertake. Cf. Emma Ah Ho v. Cobb, 617 P.2d 1208, 1212-13 (Hawaii 1980) (contract for rental of state irrigation facilities not a "rule" under Hawaii APA).

Indeed, a rulemaking requirement applicable to all proprietary price setting would, in some situations, lead to absurd consequences, the avoidance of which is a principal tenet of statutory construction. See, e.g., Kindley v. Governor of Maryland, 289 Md. 620, 625 (1981) ("construction of a statute which is 'unreasonable, illogical or inconsistent with common sense'" to be avoided).

For example, a leading scholar of state administrative law has pointed to "the very real burden [that would be] imposed on agencies if they were required to follow rulemaking procedures every time they changed the price of carrots and peas in the cafeteria line". Bonfield, The Iowa Administrative Procedure Act: Background, Construction, Applicability, Public Access to Agency Law, the Rulemaking Process, 60 Iowa L. Rev. 731, 840 (1975). "[S]uch a burden," he continued, "would be intolerable and unreasonable, and would only serve to further increase the price of goods sold by the amount of the administrative costs incurred." Id.

We do not think that the general language in the APA's definition of rule should be construed to require such a prerequisite to an agency's proprietary price setting, to "those charges fixed by government in the performance of functions not peculiarly or uniquely governmental; that is, charges of a sort normally encountered in the outside world". Bonfield, supra, at 841. In our view, the General Assembly did not intend to apply rulemaking, a device for the control of regulatory policymaking, to proprietary price setting, the control of which is a function of market forces. "Arguably, citizens have no greater interest in participating in the specification of such charges when made by government than in the specification of those charges when they are made by entrepreneurs outside of government." Bonfield, supra, at 841. Because the MPA tariff in question is an example of such price setting, we believe that it is not within the definition of "rule" in Article 41, §244(c).

III
Inapplicability of Rulemaking to MPA Tariff Setting

In Part II above, we concluded that the MPA marine terminal tariff is not a "rule" within the meaning of that term in the APA, because the tariff is an example of proprietary price setting, about which the General Assembly did not intend to require rulemaking. Quite apart from this construction of the APA generally, we are of the view that, separately and in particular, the General Assembly did not intend to impose rulemaking requirements on MPA tariff setting.

A. History of the MPA

The predecessor of the MPA, the Maryland Port Authority, was created by the General Assembly in 1956. Chapter 2, Laws of Maryland 1956, Extra Session. Under the 1956 legislation, former Article 62B, §13(a), the Port Authority had the following specific authorization: "[T]o fix, revise, charge and collect rentals, rates, fees or other charges for the use of each project, and to contract with any person, partnership, association or corporation desiring the use of any part of a project and its appurtenances for any proper purpose, and to fix the terms, conditions, rentals and rates of charges for such use."

The General Assembly recognized that the level of such tariffs would necessarily fluctuate with market conditions, because it prescribed in §13(a) as follows: "Such rentals and other rates, fees and charges shall be so fixed and adjusted ... as to provide funds sufficient with other revenues, if any, (i) to pay the Authority's Current Expenses . . . , (ii) to pay the principal of and the interest on all revenue bonds issued under the provisions of this Article . . . , (iii) to create reserves for such purposes ..." independence, in order that it might carry out its functions with the flexibility ordinarily found in business concerns". 41 Opinions of the Attorney General 301 (1956). Indeed, that Opinion held that the Authority was empowered "to establish its own budget in any manner it may see fit", outside the overall State budget. Id. at 302. The Court of Special Appeals characterized the MPA as having, under its original statute, "fiscal autonomy". Maryland Port Admin. v. I.T.O. Corp., 40 Md. App. 697, 709 (1978).

When, in 1957, the General Assembly enacted the APA, there is no indication that it intended to impose the APA's rulemaking requirements on the Authority's independent tariff setting authority. The imposition of such requirements would have amounted to an implied repeal of a portion of the MPA's autonomy, and of course implied repeals are disfavored. See, e.g., Carroll County Educ. Ass'n v. Board of Educ., 294 Md. 144, 152 (1982).

To summarize, from its inception the MPA had two kinds of independence: (i) substantive fiscal autonomy, the authority to set its fees and allocate its revenues as it alone saw fit; and (ii) procedural fee setting autonomy, the authority to set its fees by the methods used by other entities in the business of providing marine terminal services. In 1970, the MPA's name and status changed. It became the Maryland Port Administration, a "part of the Department of Transportation."

However, the repeal of the MPA's substantive fiscal autonomy does not necessarily imply that the General Assembly also intended to require the MPA, for the first time in its history, to follow rulemaking requirements in the adoption of tariffs. The change in the MPA's status did not change the fact that tariff levels must still reflect costs, competition from other ports, and other market conditions, nor the fact that the setting of tariffs is subject to separate federal requirements and review, a point that we discuss in more detail in Part III B below. Publication of proposed tariffs might well place the MPA in a competitive disadvantage by forcing premature disclosure of its intended pricing structure to its competitors.

We therefore conclude that the General Assembly did not intend to impose rulemaking requirements on the MPA's tariff setting, what we have termed the MPA's procedural fee setting autonomy, through its legislative restructuring of the agency.

B. Impact of Federal Law

The Shipping Act of 1916 establishes a system for federal scrutiny of the rates, tariffs, and charges of "common carrier[s] by water" and "other person[s] subject to this chapter". See 46 U.S.C. §§816, 817, and 820. The latter classification includes entities "carrying on the business of . . . furnishing wharfage, dock, warehouse, or other terminal facilities in connection with a common carrier by water." Section 816 provides:

"Every [common] carrier [by water] and every other person subject to this chapter shall establish, observe, and enforce just and reasonable regulations and practices relating to or connected with the receiving, handling, storing, or delivering of property. Whenever the Commission finds that any such regulation or practice is unjust or unreasonable it may determine, prescribe, and order enforced a just and reasonable regulation or practice."

Section 820 requires those covered by the Shipping Act, including terminal operators, to file "any . . . rate, or charge" with the Federal Maritime Commission ("FMC"). Under §821, "any aggrieved person may file a complaint with the FMC, challenging a particular practice or tariff as unreasonable". Maryland Port Admin. v. SS American Legend, 453 F.Supp. 584, 592 (D.Md. 1978). Section 822 requires an FMC order resulting from a rate investigation to be made only after a "full hearing". If, at the conclusion of such a hearing, the FMC finds a violation of §816, it has authority to do more than just prohibit unreasonable rates; it can directly prescribe terminal charges to remedy the effects of previously unlawful charges. State of California v. United States, 320 U.S. 577, 584 (1944).

The filing of tariffs by terminal operators is governed in more detail by the Federal Maritime Commission's regulations, which require common carriers to expeditiously pass through increases in these terminal charges to their customers. See 46 C.F.R. §§531.10(b)(5) and 536.9(b).

As a result of this federal regulatory scheme, it is "legally necessary for MPA to have some tariff in effect" in order to charge for its terminal services. Maryland Port Admin. v. I.T.O. Corp., 40 Md. App. at 702 n. 8 (1978). One federal court has summarized the effect of a tariff as follows: "The terms of a lawfully promulgated tariff become (in essence) the only agreement permitted between the party who supplies the facilities or services and the party who utilizes them." Folgner v. Italian Line, 383 F.Supp. 816, 818 (D.C.Z. 1974).

Although the mere filing of a tariff with the FMC does not constitute federal approval of it, the Shipping Act and implementing regulations do grant the FMC primary jurisdiction over the validity and construction of such tariffs. Maryland Port Admin. v. SS American Legend, 453 F.Supp. at 592-93. Thus, the federal government exercises a comprehensive and detailed regulatory role with respect to marine terminal tariffs.

The statute governing the MPA evidences an awareness of this federal supervisory role. Under §6-204(m) of the Transportation Article, the MPA is expressly authorized to "appear in its own behalf before any board, commission, department, or agency of the federal government ... in any matter . . ." concerning its operations. In light of this comprehensive federal presence, the General Assembly would have thought it unnecessary to apply APA rulemaking procedures to MPA tariffs. In sum, we doubt that the General Assembly intended to require that each such tariff undergo a lengthy, burdensome, and largely inapposite rulemaking process in addition to federal review.

IV
Conclusion

In summary, it is our opinion that a Maryland Port Administration tariff for marine terminal services is not a "rule" within the meaning of the Maryland Administrative Procedure Act, because (i) the definition of "rule" in Article 41, §244(c) of the Maryland Code does not generally apply to the action of a State agency in setting, as a proprietor, prices and related terms for the sale of its own goods or services in a competitive market, and (ii) in light of the particular history of the MPA and the federal regulatory presence in this area, the General Assembly more specifically did not intend to impose rulemaking requirements on MPA tariff setting.

In reaching these conclusions, we acknowledge that they are not altogether free from doubt. Therefore, we recommend that the General Assembly consider a clarification of the law, both as to proprietary price setting generally and MPA tariff setting in particular.

Stephen H. Sachs, Attorney General
Robert A. Zarnoch, Assistant Attorney General

Editor's Note: Many of the statutory provisions reviewed in this Opinion have since been recodified as part of the new State Government Article ("SG" Article). See generally SG Title 10, Subtitle 1 ("Administrative Procedure Act, Regulations"); SG Title 7, Subtitle 2 ("Division of State Documents"); and SG Title 2, Subtitle 5 ("Joint Committee on Administrative, Executive, and Legislative Review").