initially based is substantially similar to the destination inspection and that, therefore, contrary to the conclusion of the Supreme Court, they were comparing like with like. They also contend that there is sufficient evidence in the record so that findings can be made which will meet the objections of the Supreme Court.

The Supreme Court found that our prior report was inadequate because it failed (1) to show that the damage claims include-or should reasonably be deemed to include the exempt damage which is to be deducted from them, (2) to distinguish between different kinds of physical damage in the application of the tolerances, and (3) to consider the relationship between the physical damage represented by the tolerances and the legal loss for which damage claims are asserted.

Eggs are highly perishable and fragile. A certain amount of damage occurs to them during the grading and packing operations. The principal cause of shell damage prior to rail transportation is attributable to the fragility of the commodity. The loading of eggs in rail cars also involves certain hazards but, where performed by skilled and competent labor, the risk of breakage is less than in grading and packing.

The Department of Agriculture made studies with respect to damage to shell eggs which shows that when eggs from the farm are delivered at the packing plant, 5 percent of them contain checks. Of this amount, 4 percent existed when the eggs left the farm, and an additional 1 percent developed in the movement to the plant. In addition, 12 percent consisted of stains and dirties. At the plant the eggs are reworked and packed. In 1948 and 1949, a careful inspection was made of eggs as they were being loaded into 115 railroad cars at points in the midwestern area, which disclosed that there was an average of 1.4 percent stains and dirties, 1.9 checks, and 0.1 designated as loss.

Studies submitted by respondents of origin inspections made by them of shipments of eggs shows that there is shell damage in every carload of eggs, irrespective of whether the eggs are handled and repacked at rail point of shipment or are trucked to that point. Surveys made by respondents in 1947 and 1948, of 126 shipments of eggs from Indiana and less than 100 shipments from Iowa and Minnesota showed percentages of shell damage ranging from 2.2 to 3.2, 2.46 to 2.57, and 1.81 to 3.48, respectively. An inspection by the Western Weighing & Inspection Bureau of 59 shipments of eggs from numerous points in Iowa and 1 from Kasson, Minn., during the period from April 19 to June 30, 1949, showed broken and checked eggs ranging from 0.93 to 7.26 percent, and averaging 2.61 percent.

At the further hearing, respondents' witness testified in connection with those inspections as follows:

Q. (By Mr. McDonald) Those field investigations at point of origin were made by you personally, largely, as I understand it, and, to the extent they were not, under your personal direction and supervision?

A. That is correct.

Q. What sort of inspection did you make in making those inspections? Were those simply visual or manual inspections or exactly what type of inspections? A. They were visual, manual inspections, except as I recall in the latter part of the tests we used a portable light on some few cars. That was the last part of

our

COMMISSIONER MITCHELL. Used what?

The Witness. A portable light-candle. We had a portable light and we took the eggs, usually the top layer of eggs

COMMISSIONER MITCHELL. You never took out anything under the top layer, have you,

The Witness. Occasionally we have gone through the entire case.
COMMISSIONER MITCHELL. In some of these checks?

The Witness. Yes, sir.

COMMISSIONER MITCHELL. What would cause you to go through them?

The Witness. If we were testing a load method, for instance.

Q. And those inspections were made by you under instructions to undertake to ascertain the extent to which shell damage existed in cars of eggs being offered for rail shipment, is that correct?

A. Yes, sir.

Inspections of this type, in which, in the great majority of instances, only the eggs in the top layer of the case were examined, are insufficient to determine the amount of damage existing in a shipment of eggs at the time it is being tendered to the railroads.

Except in rare instances, eggs are not examined by the railroads for concealed damage at point of origin even though it is known that there is damage in every carload of eggs accepted by them for shipment. Without considering such damage, a bill of lading indicating that the shipment is received in good order is given to the shipper. Upon the arrival of a shipment of eggs at destination, the consignee or his representative has the right to perform an inspection under the supervision of the carrier's representative for the purpose of ascertaining whether such shipment contains shell damage. At New York City, when a shipment of eggs arrives, the car door is opened and a representative of the consignee is usually waiting with his men to start the unloading. Consignee's representative, in order to determine the amount of shell damage, points out several cases of eggs which he asks to be set aside for inspection. The work of unloading the car continues and in 2 or 3 minutes the representative selects additional cases for inspection. The unloading continues until the men reach the bunker stacks, where there is more likelihood of damage.

The representative then selects additional cases from each bunker for inspection. Under the rules under investigation in No. 30030, the consignee is limited to a choice of 20 cases for the initial inspection. If there is any shell damage in the top layer of any case, even if it is only one egg, the consignee has the right to examine all of the cases in the shipment. The consignee may, if he so desires, go through the entire carload and examine every single egg. If, however, the examination of the top layer of the 20 cases discloses no evidence of damage, the inspection is considered complete and final for the entire shipment and a receipt indicating that the shipment is in good order is required of the consignee. Under the rules under investigation in I. and S. Docket No. 5792 and those which became effective May 2, 1952, the consignee as a matter of right may examine every case of eggs in a shipment. During the further inspection, if there is one, the lids of the balance of the cases in the shipment are lifted and any showing damage are set aside for reconditioning.

A joint inspection of all cases designated for inspection by the consignee is conducted by a representative of the carrier and the consignee or his representative, and the extent of the damage, together with the facts pertaining thereto, is noted by the inspectors. All damaged cases may be repacked by the consignee at the carrier's expense. In reconditioning the cases, 2 men work on a case, 1 at each end. During the reconditioning, all stained, leaky, or cracked eggs are removed from the case and repacked into other cases containing similarly damaged eggs. Completely damaged eggs are replaced in the case by good ones. The men work down through the case until they find a layer without any damage. At this point, they perform what is called "reaming." This consists of taking a layer of eggs and lifting the filler. If no damage is discovered, each layer which contains 36 eggs is lifted separately as a unit and they look under it. If the filler is not stained and does not disclose any damage, the entire layer of eggs is placed in the case containing the good eggs without further inspection. Normally, in a case which does not show much damage, the men reconditioning the cases do not handle each egg. Certain shell damage is almost impossible to ascertain by visual observation alone. Where, however, there is a substantial amount of breakage in a case, every egg is handled and the case is repacked.

Where damaged eggs are accepted by the consignee or owner, the claim is limited to the difference between the good order value and the verified value of the damaged eggs. If the amount of damage discovered in a shipment is not more than the amount of the tolerance, no claim is allowed. In the application of the tolerance, each case is used as a unit provided information is furnished the carrier by the joint inspection of the damage in each container. In other in

stances the entire consignment is used as a unit. Where the amount of the damage exceeds the amount of tolerance, claims are allowed for all damage in excess thereof if the examination developed carrier liability. There is no way of telling conclusively at the time of the inspection whether the eggs were damaged in transit or prior to the time they were tendered to the carrier. As a practical matter, generally, all damage is presumed to have occurred in transit.

In the adjustment of claims for damage, the notation made on the paid freight receipt or other document by the Railroad Perishable Inspection Agency's inspector is considered conclusive as to the extent of the damage and is almost equivalent to a draft against the carrier. In all repacked cases new fillers and flats are furnished by the consignee. When the damage claim is filed, it includes the cost of the labor and materials used in repacking the eggs in addition to the dollar value of the damaged eggs. Approximately 25 percent of the total amount claimed for damage to eggs is apportioned to labor and materials. The cost of lifting the lids of the cases in a bad-order car is not allowed as part of the damage claim.

At the further hearing, witnesses for the respondents stated that the inspections were performed by the consignees or their representatives in such a manner as to discover all the damage present in a shipment. However, their testimony concerning the manner in which the inspections were made negatives those statements. There are small cracks in the shells of eggs which for all practical purposes can only be discovered by clicking two eggs together. Admittedly, not every egg in a shipment is clicked.

A Federal inspection of five shipments at New York, which had been previously inspected in the usual commercial manner upon arrival at that point, showed additional damage of 1.72 percent stains and 2.2 percent checks, or a total of 3.92 percent. A similar Federal inspection at that point of another group of five shipments disclosed an average of 0.66 percent stains and 2.9 percent checks, or a total of 3.56 percent. Ten carloads of eggs from points in Iowa, which were accepted as being in good order by the consignee in New York, but which were later given a Federal inspection, disclosed an average combined destination damage of 7.3 percent. From the same origins in Iowa, eight carloads were received in bad order, and after these shipments had been reconditioned, a Federal inspection disclosed an average remaining damage of 7 percent.

The evidence shows that the inspections at the destination points fail to detect all of the shell damage.

On reconsideration, we find that the schedules containing damage tolerances on eggs are not shown to be just and reasonable, and that the prior findings herein, to the extent they are inconsistent herewith,

are reversed. An order will be entered requiring the cancellation of the schedules here under investigation and those filed in conformity with the findings in the prior report herein and discontinuing these proceedings.

MURPHY, Commissioner, concurring in part:

No. 30030 was, as stated on page 380 of the prior report, instituted concerning the lawfulness of schedules proposing changes in the tolerance rules, which became effective July 24, 1948. I. and S. Docket No. 5792 involves additional proposed changes in the tolerance rules which were published to become effective May 12, 1950, but were suspended.

It is my understanding that the report would condemn all tolerances including those which were approved in National Poultry, Butter & Egg Assn. v. N. Y. C. R. Co., 52 I. C. C. 47, decided January 21, 1919. We should limit our disapproval either to the schedules which were filed to become effective July 24, 1948, or to those published to become effective May 12, 1950. In view of the statement on page 380 of the prior report, there is some doubt whether the schedules in effect prior to July 24, 1948, are properly in issue. If they are in issue they do not involve the question of carriers' liability for loss and damage as discussed in the report of the Supreme Court. There the Court was concerned with the possibility that carriers were attempting to avoid liability for loss and damage occurring after the shipments were received by them and primarily with the schedules under investigation in I. and S. Docket No. 5792. The schedules approved in National Poultry, Butter & Egg Assn. v. N. Y. C. R. Co., supra, were limited to shipments not processed at rail origin but which had moved some distance, presumably by motortruck, to the rail origin and, therefore, had been subjected to circumstances or conditions which afforded opportunity for damage to the commodity involved.

The tariff provisions which the carriers proposed in I. and S. Docket No. 5792 differ materially from those in effect prior thereto in that the latter merely provide a method to determine the amount of damage (usually concealed) existing at the time the shipment is received by the carrier, without an extensive examination of each shipment, whereas the proposed schedules would substitute tolerances of 4 and 6 percent on shipments packed at rail origins and at other than rail origins, respectively, in lieu of 5 percent on the latter and no tolerance on the former and includes in each of the proposed tolerances 1 percent for inherent damage occurring after the shipments are received by the carriers.