the electric heater company

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WATER HEATERS SINCE 1920 THE ELECTRIC HEATER COMPANY 45 SEYMOUR STREET / P.O. BOX 288 STRATFORD, CT 06615-0288 TEL: (203) 378-2659 FAX: (203) 378-3593 Hhttp://www.hubbellheaters.com H Commodity Classifications Standards Board (CCSB) April 29, 2011 1001 North Fairfax Street Suite 600 Alexandria, VA 22314-1798 ATTN: Joel L. Ringer, Chairman SUBJ: Reclassification of Water Heaters; Current NMFC item 26520 Docket 2011-2, Subject 2 Dear Mr. Ringer, Please accept the following information for inclusion in the public docket file for CCSB Docket 2011-2 to amend the NMFC for reclassification of water heaters. The information contained herein is provided on behalf of Hubbell Electric Heater Co. and its wholly owned subsidiary Vaughn Thermal Corp. (formally known as Vaughn Manufacturing). Please see the contact information below for addition to the Party of Record List. Hubbell Electric Heater Co. ATTN: Transportation Manager PO Box 288 Stratford, CT 06615-0288 Vaughn Thermal Corp. ATTN: Transportation Manager PO Box 5431 Salisbury, MA 01952-5431 In review of CCSB Docket 2011-2 Subject 2, it is our contention that the Notice of Proposed Amendments to the National Motor Freight Classification (NMFC) resulting from Research Project 1108 contains analysis that does not accurately reflect the facts for product category, NMFC item 26520. The analysis in the docket results in a significant misrepresentation of the general product and leads to invalid conclusions and a proposed freight reclassification that is unfair and harmful to the water heater industry. It is respectfully requested that the CCSB address these issues in order to make a fair and accurate assessment of the freight class for this product category.

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Page 1: THE ELECTRIC HEATER COMPANY

WATER HEATERS SINCE 1920

THE ELECTRIC HEATER COMPANY45 SEYMOUR STREET / P.O. BOX 288

STRATFORD, CT 06615-0288 TEL: (203) 378-2659 FAX: (203) 378-3593

Hhttp://www.hubbellheaters.comH Commodity Classifications Standards Board (CCSB) April 29, 2011 1001 North Fairfax Street Suite 600 Alexandria, VA 22314-1798 ATTN: Joel L. Ringer, Chairman SUBJ: Reclassification of Water Heaters;

Current NMFC item 26520 Docket 2011-2, Subject 2

Dear Mr. Ringer, Please accept the following information for inclusion in the public docket file for CCSB Docket 2011-2 to amend the NMFC for reclassification of water heaters. The information contained herein is provided on behalf of Hubbell Electric Heater Co. and its wholly owned subsidiary Vaughn Thermal Corp. (formally known as Vaughn Manufacturing). Please see the contact information below for addition to the Party of Record List. Hubbell Electric Heater Co. ATTN: Transportation Manager PO Box 288 Stratford, CT 06615-0288 Vaughn Thermal Corp. ATTN: Transportation Manager PO Box 5431 Salisbury, MA 01952-5431 In review of CCSB Docket 2011-2 Subject 2, it is our contention that the Notice of Proposed Amendments to the National Motor Freight Classification (NMFC) resulting from Research Project 1108 contains analysis that does not accurately reflect the facts for product category, NMFC item 26520. The analysis in the docket results in a significant misrepresentation of the general product and leads to invalid conclusions and a proposed freight reclassification that is unfair and harmful to the water heater industry. It is respectfully requested that the CCSB address these issues in order to make a fair and accurate assessment of the freight class for this product category.

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As the first and possibly most important point, the CCSB should consider more accurate and expanded terminology when discussing the different construction types for water heaters. As the docket points out, there are two major construction features that are most relevant to the NMFC, namely “Tank Construction Type” and “Outer Shell Type”. We agree that these are two relevant and important construction features that should be considered when determining the freight class for water heaters. However, the CCSB fails to achieve proper reclassification because it incorrectly correlates “Outer Shell Type” as the critical feature to consider, at least from a weight density perspective, when in fact the correct construction feature to consider for this purpose is “Tank Construction Type”. For the benefit of the CCSB when discussing this product category, please consider figure 1 below as the water heater construction types likely to be of concern when considering reclassification. Figure 1. Industry Standard Water Heater Types

A. Typical Tank Construction Types 1.) Metal tank (e.g. steel, stainless steel, copper alloy) with no lining 2.) Metal tank (e.g. steel) with light weight lining (e.g. glass, epoxy, galvanizing) 3.) Metal tank (e.g. steel) with heavy weight lining (e.g. cement) 4.) Plastic tank 5.) Fiberglass reinforced tank

B. Typical Outer Shell Construction Types

1.) Metal 2.) Plastic

There are important distinctions between each of the above types, and the docket seems to confuse the issue at times and not fully appreciate the differences with respect to weight between the various types of construction. As an example, on page 3 of 8 of the subject docket, the report states “When tank-type water heaters are evaluated on the basis of the tank material, water heaters that have a metal outer shell range in density from 0.80 to 16.13 pcf, with an average of 8.09 pcf, while water heaters that have a plastic outer shell range from 2.16 to 7.71 pcf, with an average density of 4.87 pcf. It is noted that while the density ranges overlap, the average density of the metal units is significantly higher than that of the plastic units.” This analysis is misleading and illustrates the lack of understanding of the relevant construction features for the product. The fact of the statement might well be true, but it is invalid because it incorrectly and misleadingly groups water heaters by the outer shell type, when in fact the most important factor when considering the density is the tank type not the outer shell type. There are important distinctions between the various water heater construction types that result in significant weight and weight density differences. As an example, a metal tank with a heavy weight lining (e.g. cement) is substantially heavier than a metal tank with a light weight lining (e.g. glass) or a metal tank with no lining at all. However, there is no appreciable difference in weight between a plastic tank and a fiberglass reinforced tank. Likewise, there is no appreciable difference in weight between a glass lined tank and a tank with no lining at all. Regarding the

Page 3: THE ELECTRIC HEATER COMPANY

outer shell, although a metal shell is heavier than a plastic shell, the difference between the two is an insignificant portion of the overall weight of the water heater. Therefore, to properly determine the freight class of a water heater, it is proposed that the CCSB would be better served to consider the tank construction as the major differentiating feature. The consideration of the type of outer shell (metal or plastic) is a relatively minor point when considering weight density. However, it is recognized that a plastic shell is potentially less likely to be damaged in transit compared to a metal shell, but this is secondary to the weight density of the overall product. For the CCSB’s consideration it is proposed in figure 2 below a more accurate grouping that is a fair representation of the different tank construction types. Figure 2. Proposed Water Heater Tank Types

1.) Metal tank with glass lining/no lining 2.) Metal tank with cement lining 3.) Plastic and Fiberglass reinforced tanks

It should be pointed out that a metal tank produced today is typically constructed with a plastic outer shell. However, on a relatively infrequent basis a metal tank may sometimes be produced with a metal outer shell. A plastic or fiberglass reinforced tank on the other hand is almost always constructed with a plastic outer shell. The CCSB proposed reclassification as shown in figure 3 below groups water heaters by their outer shell type, which would result in unfair, inaccurate and improper classification of the vast majority of water heaters shipments resulting in a significant negative impact on the water heater industry. It is even possible that if the rates proposed in this docket are approved, that due to the large volume of shipments and the broad range of customers served, that the negative impact could extend beyond the water heater industry, potentially putting the CCSB and NMFC in a difficult and embarrassing position of having to defend unfair and poorly construed rates. Figure 3. The CCSB Proposed Classification Provisions Item 25650 HEATERS, water Sub 1 →With plastic outer shell……….class 250 Sub 2 →With metal outer shell……..….class 150 A major fault with the CCSB’s proposed reclassification is that it assumes a water heater with a plastic outer shell is by definition constructed with a plastic inner tank, hence the presumed low average weight density and therefore the justification for the higher freight classification (in this case, proposed as class 250). This assumption is most definitely not the case. The construction feature that matters most when considering the weight and associated weight density of a water heater is the tank construction, not the outer shell construction. From a weight perspective, the type of outer shell construction (metal or plastic), is insignificant as the weight of either type of outer shell is a relatively small percentage of the overall weight of the water heater.

Page 4: THE ELECTRIC HEATER COMPANY

In our opinion the proposed reclassification in docket 2011-2 Subject 2 does not accurately categorize the different construction types of water heaters and as a result is an unfair method for determining the appropriate freight class. We believe that the proposed reclassification unintentionally results in a bias against water heaters with metal tanks, which account for the vast majority of water heater shipments. As an alternative offered for the CCSB’s consideration, it is respectfully proposed that a more accurate way to group water heaters is adopted based primarily on the tank type, not on the outer shell. Given this, the following reclassification is proposed in figure 4 below. Figure 4. Proposal #1 for the Reclassification of Water Heaters Item 25650 HEATERS, water Sub 1 →Metal tank with glass lining/no lining………….class 150 Sub 2 →Metal tank with cement lining………………… class 77.5 Sub 3 →Plastic or Fiberglass Reinforced tank.………… class 175 If the CCSB contends that the outer shell construction type (metal or plastic) is a considerable factor when determining the proper freight classification for water heaters, then the CCSB might consider expanding the categories further, as proposed below in figure 5 which takes into account the two different types of outer shells in addition to the different tank types used in water heater construction. Figure 5. Proposal #2 for the Reclassification of Water Heaters Item 25650 HEATERS, water Sub 1 →Metal tank with glass lining/no lining and metal outer shell……………. class 175 Sub 2 →Metal tank with glass lining/no lining and plastic outer shell ………….. class 150 Sub 3 →Metal tank with cement lining and metal outer shell………………….… class 85 Sub 4 →Metal tank with cement lining and plastic outer shell………………...… class 77.5 Sub 5 →Plastic or Fiberglass Reinforced tank with plastic outer shell.………..… class 175 With respect to weight density, at least in the case of the category “Metal tank with cement lining and plastic outer shell”, attached to this letter is data which indicates that the average density expressed as pounds per cubic foot (pcf) ) is well within the average of 12 pcf typical of class 85. In fact, the average pcf for the category “Metal tank with cement lining and plastic outer shell” is 13.52 and “Metal tank with cement lining and metal outer shell” is 13.96 pcf, both of which meet the requirement from a density perspective for class 77.5. With respect to the comments in docket 2011-2 that claim water heaters have a higher claims ratio than what is expected for class 85 freight, there is no mention of the offsetting benefit that the simple average value of water heaters is $2.40 per pound, which is 85% below the $16.42 maximum average value per pound associated with typical class 85 freight. Given the extremely low replacement cost (as an average cost per pound) of water heaters, it is reasonable to consider that the low value of the product offsets a slightly higher claim ratio reported by some of the carriers.

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In further regard to the claim ratio, it seems that more information is needed to understand if these claims are a true representation for what is actually happening industry wide with respect to water heater shipments. Of particular concern is the extremely wide range of reported claim ratios, which the docket claims range from 1.73% to 30%. This information in and of itself is misleading, as it simply states the overall range. To more accurately and fairly understand the claim ratio, it must be understood what is the mean and the standard deviation of all the reported claim ratios. Further to that, it would seem fairly obvious to even the casual observer that a carrier with a 30% claim ratio represents an anomaly and is indicative of a serious problem with either the product packaging, the carrier or possibly both. By including the 30% claim ratio number, the overall numbers are skewed. By probably anyone’s standard the 30% claim ratio figure reported by one carrier is extraordinarily high and most certainly does not reflect other carrier’s experience. To use this extraordinarily high claim ratio in the analysis seems unfair and disingenuous. If the CCSB continues to assert that a high claim ratio is justification for a significant increase in freight classification, then more details regarding the data sample should be provided and consideration should be made to ensure a proper sample size and proper statistical analysis is applied to determine an accurate and fair industry average claim ratio. The experience of both Vaughn Thermal and Hubbell Electric Heater with respect to claims ratio differs greatly from the numbers reported in the docket. Over the last 12 months, the claim ratio for Vaughn Thermal is 0.73% and Hubbell Electric Heater Co. has no claims. Without releasing confidential information, it should be noted that these ratios are based upon well over 1000 shipments. Clearly, the claim ratio for Vaughn Thermal and Hubbell Electric Heater are well below the typical 1% or less measure for general commodities. To account for water heaters that are either not palletized or otherwise not packaged in such a way to facilitate handling typical of class 85 freight, it is proposed that a separate note or additional category be added to address these types of freight shipments. In these cases, a freight class of 200 or 250 seems more than sufficient to account for this type of packaging. It should be noted that tank type water heaters are typically (i.e. generally) palletized, as is stated on page 4 of the docket, “tank-type water heaters are generally tendered in crates or in fiberboard containers that may, but often are not, unitized or palletized”. Please see the proposed classification grouping in figure 6 below which takes into account product tendered non palletized. Regarding tankless water heaters, we agree that this product type represents a category which may exhibit transportation characteristics different from a typical storage type water heaters. This is in part due to the fact that tankless water heaters are typically unitized and palletized. These shipping and product characteristics are also equivalent to “compact” water heaters, which are small storage type water heaters less than or equal to 16 gallon storage capacity. These compact water heaters are often unitized and palletized, and as such should be grouped equivalent to tankless water heaters. Please see the proposed classification grouping in figure 6 below which takes into account tankless and compact type water heaters tendered on a pallet.

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Figure 6. Proposal #3 for the Reclassification of Water Heaters Item 25650 HEATERS, water Sub 1 →Metal tank with glass lining/no lining and metal outer shell…………..…..…class 175 Sub 2 →Metal tank with glass lining/no lining and plastic outer shell …….…..….….class 150 Sub 3 →Metal tank with cement lining and metal outer shell………………………….class 85 Sub 4 →Metal tank with cement lining and plastic outer shell………………........…...class 77.5 Sub 5 →Plastic or Fiberglass Reinforced tank with plastic outer shell.…………….....class 175 Sub 6 →Tankless and storage water heaters ≤16 gallons, in boxes and palletized…....class 92.5 Sub 7 →Any water heater tendered non palletized……………………..………….…..class 200 Regarding handling, docket 2011-2 recognizes that most water heater shipments are tendered on a pallet and are handled in a manner similar to other like packaged freight. The precautionary information and labels on some shipments is innocuous and generally accepted as obvious handling instructions. “This Side Up” has no real impact on handling, as most water heater shipments are palletized and as such it would not make sense for the shipper to change its orientation. “Handle With Care” is a generic term commonly found on packages and is a general statement which does not in and of itself call for any unusual handling by the shipper. The information contained herein is offered to the CCSB to assist in the task of determining if reclassification of water heaters is necessary, and if so determined, what the new freight class structure and product grouping should be. There seems to be a clear need to better define the different construction types, and from there it seems that reclassification makes sense and is appropriate. However, the proposed reclassification contained within Docket 2011-2, Subject 2 overly simplifies the product. This incorrect grouping results in an unfair freight class determination, and as such it is respectfully requested that the CCSB revise their proposed reclassification accordingly. Respectfully Submitted,

William E. Newbauer III COO Hubbell Electric Heater Co.

Page 7: THE ELECTRIC HEATER COMPANY

Vaughn Thermal and Hubbell Electric Heater Co.

Response to Docket 2011-2, Subject 2

10 80 20 32

Tank Type Outer Jacket C(G

TypeStorage apacity allons)

Shipping Dimensions (Inch Ses) hipping Volume (Cubic Feet)

Simple Average

(pcf)

Shipping Density (Lbs per

Cubic Foot)

Shipping Weight (Lbs) Width Length Height

Packaging Characteristics

Metal Tank with Cement Lining Plastic Outer

10 117 23 23.0 26.0 7.96 14.70

13.52

20 147 23 23.0 37.0 11.33 12.98

30 180 23 23.0 45.0 13.78 13.07

40 245 23 23.0 61.0 18.67 13.12

Jacket 40 237 28 28.0 36.0 16.33 14.51Palletized, blocked, double

strapped, shrink wrapped. With or 50 245 23 23.0 54.0 16.53 14.82 without wooden corners.65 290 28 28.0 49.0 22.23 13.04

80 355 28 28.0 61.0 27.68 12.83

100 410 28 28.0 71.0 32.21 12.73

120 433 28 28.0 71.0 32.21 13.44

Metal Tank with Cement Lining Metal Outer J

150 1300 38 44 102 98.69 13.17

13.96Palletized, blocked, lagged, shrink wrapped and heavy duty wooden

250 1850 44 50 112 142.59 12.97

300 2180 50 56 100 162.04 13.45

350 2500 50 56 106 171.76 14.56acket400 2700 50 56 122 197.69 13.66 crate.500 3225 56 62 114 229.06 14.08

600 3650 56 62 131 263.21 13.87

700 4150 62 68 107 261.06 15.90

Metal Tank No Lining Plastic Outer

10 80 20 2020 32 7 417.41 10 8010.80

Palletized, shrink wrapped and

20 120 22 22 41 11.48 10.45

30 135 22 22 54 15.13 8.93

40 200 22 22 62 17.37 11.52Jacket 50 250 28 28 49 22.23 11.25 heavy duty wooden crate11.28

65 300 28 28 61 27.68 10.84

80 400 28 28 71 32.21 12.42

100 490 32 32 63 37.33 13.13

120 550 32 32 76 45.04 12.21

Tankless/Compact N/A4 797 48 40 68 75.56 10.55

10.57 Unitized, palletized, strapped and shrink wrapped6 95 35 21 21 8.93 10.64

16 160 27 27 36 15.19 10.53

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April 28, 2011 Mr. Joel L. Ringer Chairman Commodity Classification Standards Board 1001 North Fairfax St. Suite 600 Alexandria, VA 22314 Re: Reclassification of Water Heaters, current NMFC Item 26520–Docket 2011-2, Subject 2 Dear Mr. Ringer The Air-Conditioning, Heating, and Refrigeration Institute (AHRI) is a national trade association representing manufacturers of air-conditioning, heating and commercial refrigeration equipment, associated controls and accessories. One of our product sections is the Water Heater Section which includes all the major manufacturers of residential and commercial gas, oil and electric water heaters, both tank and tankless types, in the U. S market. We have reviewed your March 17, 2011 letter regarding the reclassification of Water Heaters noted above. Based on discussions with our water heater manufacturers members who essentially comprise the entire residential storage water heater industry in the U.S. and also are major manufacturers of all types of water heaters sold in the U.S. we believe that the proposed classification changes in Docket 2001-2, Subject 2 are not appropriate and are based on limited data insufficient to validate these proposed changes. Two key parameters that are discussed in the docket are the density and the claims ratio. We note that information was received from only 4 respondents. While we recognize that the CCSB can only work with the information that is available to it, in this case the information is inadequate to properly characterize the current state of LTL water heater shipments. We have gathered the following data for 2010 LTL shipments from our major water heater manufacturer members. We agree generally with the range of densities shown in the docket. Our information indicates that there are no shipments below 2 pcf but, given the small number of observations, the percentages of .64% or .32% shown in the docket are close to insignificant. More significantly, based on shipments of over 200,000 tank-type units, the overall average density is about 9 pcf. This indicates that the interval shown as the second largest in the docket document is actually the largest. This density value is associated with a class 100. In the case of tankless models, our information shows an overall average density of about 12.6 pcf which is associated with a class 85.

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The docket explains the adjustment of the classifications due to a range of claims ratios from 1.73% to almost 30%. The information we have obtained from our members indicates that all of them had a claims ratio in 2010 under 10%. Although this is more than the 1% considered normal for general commodities, the small amount of data that was analyzed for this docket does not support a conclusion that any increase in classification, let alone a 2 step jump, is warranted for water heaters. Additionally, the information we have obtained from our members specific to plastic tank and tankless water heaters indicates that their claims ratios are below the “normal” 1% noted above. For those types of water heaters, this data suggests that any classification adjustment because of handling, stowing or liability characteristics should be a lowering of the classification. We respectfully recommend that the Board not approve these proposed classification changes and retain the current classifications. Sincerely,

Frank A. Stanonik Chief Technical Advisor

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From: William Mascaro Sent: Friday, April 29, 2011 8:42 AM To: 'Stanonik, Frank'; Joel Ringer Subject: RE: NMFC Item 26520 Docket 2011 2 Subject 2

Mr. Stanonik,

Thank you for the statement. We have added it to the Public Record for Subject 2 of Docket 2011-2 involving Water Heaters and made you a Party of Record to the proposal.

In your statement, you refer to over 200,000 shipments of tank-type units as the basis for your information, however no underlying data has been submitted. In order for the CCSB to have as accurate a basis as possible when considering this matter, would it be possible to provide me with the underlying data on which the figures in your statement are based. As is our policy, any information you provide will only be identified as “shipper.”

Regards,

William Mascaro Member Commodity Classification Standards Board 1001 North Fairfax Street, Suite 600 Alexandria, Virginia 22314 703-838-1834

Page 11: THE ELECTRIC HEATER COMPANY