How the DOT distinguishes interstate from intrastate commerce

Living in a country that has both a federal and state governments inevitably leads to some tension between federal and state laws, particularly when you’re dealing with a topic like highway safety and trucks and buses that frequently cross state lines. Determining whether a commercial driver is engaged in interstate or intrastate commerce is, unfortunately, not as intuitive as it might sound at first blush. But, it's a crucial distinction because it dictates what regulations (i.e., state or federal) apply to his/her operations. In this article, we'll explore how the USDOT and the Federal Motor Carrier Safety Administration (FMCSA) distinguish between interstate and intrastate commerce.

Under the U.S. Constitution, powers that are not explicitly granted to the federal government are generally reserved to the states, and the states have broad “police powers” to enforce laws protecting public welfare, safety, and health. So when it comes to commercial transportation, and understanding what safety-related regulations apply to your operations, you need to first understand whether you are operating in interstate or intrastate commerce.

For decades, federal and state courts have wrestled with the question of what constitutes interstate or intrastate commerce, particularly in the realm of commercial highway transportation. For its part, the FMCSA has defined the term “interstate commerce” in its federal safety regulations as: trade, traffic, or transportation in the United States that is (1) between a place in a state and a place outside of such state (including a place outside of the United States).

So this is the intuitive one. Interstate commerce most definitely includes transportation between states and between countries. But here’s where things start to take a bit of a turn towards the confusing. The second type of transportation that qualifies as interstate under the FMCSA’s definition occurs when that transportation is between two places in a single State through another State or place outside the United States. In other words, if in the course of traveling between two points in a single state, I have to pass through another state or country, then I am engaged in interstate commerce. A good example is I’m moving freight from New York, New York to Syracuse, New York, but the most direct route takes me through Pennsylvania, then I’m engaged in interstate commerce even though my origination and destination points are both New York. Now the last section of the FMCSA’s definition is undoubtedly the most convoluted. It says that transportation is interstate in nature when it is between two places in a State as part of trade, traffic, or transportation originating or terminating outside the state or the United States. Okay, so, we’re going to need to break this one down for sure. So, according to the definition, I’m engaged in interstate commerce if I operate solely between two points in a single state if I’m doing so as part of transportation that originated outside my state or country? What exactly does this mean?

Practical continuity of movement

Well, as I mentioned at the start, the interstate and intrastate distinction is something that the courts have tackled for several decades, and this last section of the FMCSA’s definition is really born out of some of those old court cases. Those cases essentially say that interstate commerce is determined by the essential character of the movement, manifested by the shipper’s fixed and persistent intent at the time of shipment, and is ascertained from all of the facts and circumstances surrounding the transportation. More directly, when the intent of the transportation being performed is interstate in nature, even when a particular leg of that journey happens within the boundaries of a single state, the driver and vehicle are engaged in interstate commerce and are subject to the federal rules. So, in short, it matters less about whether the driver and vehicle physically cross states lines and more about whether the freight or the passengers they are hauling at any given moment are moving in a continuous stream of interstate commerce. Now, again, this is, without question, one of the more difficult concepts about regulated transportation to grasp. So we’ll run through some practical examples in a few minutes to hopefully demonstrate how this plays out in practice.

Before we get there, though, we should first talk about at what level the interstate/intrastate commerce distinction is made. In other words, does all of the freight in the vehicle have to be moving in interstate commerce for the driver to be subject to the federal rules? Well, the answer is that technically, the distinction is made on a load-by-load, package-by-package, and passenger-by-passenger basis, meaning that if a driver is transporting a mixed load of intrastate and interstate goods or passengers, the driver is engaged in both interstate and intrastate commerce and is technically subject to two or more rule sets—the federal safety rules and the rules of any states in which he/she is operating.

Now that seems pretty problematic from an operational standpoint, because how in the world are transportation companies able to manage compliance with the federal rules and the rules of every state in which its drivers operate. Well, in reality and in my experience, most carriers are not looking at this question on a package-by-package basis to determine what rules apply. Now there are certainly some segments of the industry where it’s a lot easier to determine which rules apply. Long-haul truckload services, for example, are typically interstate in nature and subject to the federal rules. On the other hand, local construction-type transportation, assuming it doesn’t cross states lines, is often intrastate in nature. Now, in the middle are segments like last-mile and parcel delivery, which, for sure, reside in a much greyer area. But, if there’s any good news here, it’s that, in terms of safety regulations, compliance with the federal regulations will typically, though not always, ensure compliance with any state laws. So, practically speaking, many carriers that live in that grey area of interstate and intrastate commerce will follow the federal regulations and that will usually result in their drivers also being in compliance with any state-specific rules if those drivers happen to transport an intrastate package. Again, that’s not always the case, and there are certainly some situations where it is advantageous for motor carriers to follow the more lenient state safety regulations, but for a general proposition, it is accurate.

Interruption of interstate commerce

So last point before we get to some practical examples, and it’s this…can the interstate nature of goods be interrupted? In other words, if the freight that’s on my truck is moving in a continuous stream of interstate commerce, is it possible for something to break that continuous movement such that the freight is now moving in intrastate commerce? And the answer is “yes.” The interstate nature of goods can be terminated by certain types of conduct, and the most common examples are when freight is stored long-term in a warehouse or when it undergoes some type of processing that changes its essential character. Let’s get into the examples so you can see what I mean.

Examples

Let’s start with an easy one for the first example. In this example, a commercial driver transports building supplies from Indianapolis, Indiana to Louisville, Kentucky. Is the driver engaged in interstate or intrastate commerce? The answer is interstate commerce, since the driver physically crosses states lines from Indiana to Kentucky.

Alright, let’s step it up a little. In example 2, a commercial driver transports small packages from a parcel distribution hub in Austin, Texas to various points within Texas. The packages originate from various points in the United States, including some in Texas. Is the driver engaged in interstate or intrastate commerce? If you’re thinking this is a trick question, you’re partially right. The driver in this example is likely engaged in both interstate and intrastate commerce. Interstate when delivering packages that originated outside the state and destined to points within Texas. And intrastate when delivering packages that both originated in and are destined to Texas. The analysis really depends on the shipper’s intent, and whether any type of temporary storage at the distribution point in Texas terminated the interstate nature of the goods.

Example 3 involves a driver who transports intermodal containers full of goods from outside the U.S. from the Port of Los Angeles to other points within California. Is the driver engaged in interstate or intrastate commerce? The answer is interstate commerce since the goods contained within the intermodal container originated outside the country. This is true even though the driver himself never leaves the state of California.

Alright, last example. Here we have a driver who transports passengers from Orlando International Airport to points in and around central Florida. Is the driver engaged in interstate or intrastate commerce? Now this one’s even more tricky than it seems at first. Since the passengers most likely arrived to the Orlando airport from outside the state, you may be inclined to say that their subsequent ground transportation to points within the state is interstate in nature, since they are moving in a continuous stream of interstate commerce, and that’s probably usually the case. Unfortunately, the analysis in the passenger context can be little more muddy. In fact, the FMCSA has issued detailed guidance on this topic specifically, which we address in another article.

Conclusion

Alright, so that’s an overview of interstate and intrastate commerce and how it factors into commercial highway transportation and the safety regulations that govern in. For an even more in-depth look at these types of regulatory topics, be sure you check out our comprehensive online regulatory courses over at trucksafeacademy.com. Also be sure to follow us on our various social media pages for the latest highway transportation news and analysis.

About Trucksafe Consulting, LLC: Trucksafe Consulting is a full-service DOT regulatory compliance consulting and training service. We help carriers develop, implement, and improve their safety programs, through personalized services, industry-leading training, and a library of educational content. Trucksafe also hosts a monthly live show on its various social media channels called Trucksafe LIVE! to discuss hot-button issues impacting highway transportation. Trucksafe is owned and operated by Brandon Wiseman and Jerad Childress, transportation attorneys who have assisted some of the nation’s leading fleets to develop and maintain cutting-edge safety programs. You can learn more about Trucksafe online at www.trucksafe.com and by following Trucksafe on LinkedIn, Facebook, Twitter, and YouTube.