United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued December 12, 2013            Decided January 31, 2014

                         No. 13-1058

                 LILLIPUTIAN SYSTEMS, INC.,
                        PETITIONER

                              v.

       PIPELINE AND HAZARDOUS MATERIALS SAFETY
                    ADMINISTRATION,
                      RESPONDENT


           On Petition for Review of the Pipeline
       and Hazardous Materials Safety Administration


     Stephen A. Vaden argued the cause for petitioner. With him
on the briefs was Gregory S. Walden.

     Dana L. Kaersvang, Attorney, U.S. Department of Justice,
argued the cause for respondent. With her on the brief were
Stuart F. Delery, Assistant Attorney General, Michael Jay
Singer, Attorney, Paul M. Geier, Assistant General Counsel for
Litigation, U.S. Department of Transportation, Peter J. Plocki,
Deputy Assistant General Counsel for Litigation, and Joy K.
Park, Trial Attorney.

   Before: ROGERS and KAVANAUGH, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
                                2

    Opinion for the Court by Circuit Judge ROGERS.

       ROGERS, Circuit Judge: Lilliputian Systems, Inc.
manufactures micro fuel cells powered by butane, a highly
flammable liquified gas. Micro fuel cells are a portable source
of electricity, intended as an alternative to batteries to meet
consumers’ increasing demand for the use of portable electronic
devices. Lilliputian challenges the prohibition in a final rule
against airline passengers and crew carrying butane fuel cell
cartridges in their checked baggage as arbitrary and capricious
in light of the dissimilar treatment of other products, such as
aerosols containing flammable gas, that are not subject to the
rigorous safety specifications imposed on fuel cell cartridges.
For the following reasons we remand the rule.

                                I.

     The Secretary of Transportation is required to “prescribe
regulations for the safe transportation, including security, of
hazardous material in intrastate, interstate, and foreign
commerce.” 49 U.S.C. § 5103(b)(1). The Secretary is to
“ensure that, to the extent practicable, [hazardous materials
transportation] regulations . . . are consistent with standards and
requirements related to transporting hazardous material that
international authorities adopt.” 

The Secretary,
however, is “not require[d] . . . to prescribe a standard or
requirement identical to a standard or requirement adopted by an
international authority if the Secretary decides the standard or
requirement is unnecessary or unsafe.” 

Further, the Secretary may “prescrib[e] a safety standard or
requirement more stringent than a standard or requirement
adopted by an international authority if the Secretary decides the
standard or requirement is necessary in the public interest.” 

The Pipeline and Hazardous Materials Safety
Administration is charged with carrying out the Secretary’s
                                3

duties and powers related to hazardous materials transportation
and safety. 

     In 2010, the Safety Administration published a proposed
rule to amend the hazardous materials regulations in light of
amendments to the 2011–2012 edition of the Technical
Instructions for the Safe Transport of Dangerous Goods by Air
adopted by the United Nations International Civil Aviation
Organization (“ICAO”). See Notice of Proposed Rulemaking,
Hazardous Materials: Harmonization with International
Standards, 75 Fed. Reg. 52,070, 52,070 (Aug. 24, 2010) (“2010
NPRM”). The ICAO amendments permit airline passengers and
crew to carry up to two spare fuel cell cartridges in checked
baggage, including fuel cell cartridges containing liquified
flammable gases such as butane. See Int’l Civil Aviation Org.,
Technical Instructions for the Safe Transport of Dangerous
Goods by Air pt. 8;1.1.2(t)(6), ICAO Doc. 9284-AN/905
(2011–2012 ed.). The Safety Administration, however,
proposed a rule under which airline passengers and crew could
put certain spare fuel cell cartridges in their checked baggage,
but not fuel cell cartridges containing Divisions 2.1 (flammable
gas) or 4.3 (water-reactive) materials, including butane. 2010
NPRM, 75 Fed. Reg. at 52,089–90. Acknowledging that the
proposed prohibition on Division 2.1 flammable-gas fuel cell
cartridges was inconsistent with the ICAO Technical
Instructions, the Safety Administration stated that it “strongly
believes that the restriction should also include spare cartridges
containing Division 2.1 materials.” 

     In comments opposing the proposed prohibition on
flammable-gas fuel cell cartridges in checked baggage
Lilliputian argued, in part, that the Safety Administration had
neither explained why safety specifications imposed on
flammable-gas fuel cell cartridges were insufficient to render
them safe to carry in checked baggage nor compared the risk of
                                4

flammable-gas fuel cell cartridges with that of other articles
permitted in checked baggage that contain flammable gas (e.g.,
toiletry aerosols). The prohibition remained part of the final
rule.     See Hazardous Materials: Harmonization with
International Standards, 76 Fed. Reg. 3308, 3382 (Jan. 19, 2011)
(“2011 Final Rule”) (codified at 49 C.F.R. § 175.10(a)(19)(iii)).
The Safety Administration stated that it adopted the prohibition
“[b]ecause Division 2.1 flammable gases are generally
prohibited in air transportation on a passenger-carrying aircraft
as cargo and due to the questionable integrity of such articles
when packed in a passenger’s checked baggage.” 

     Lilliputian filed an administrative appeal, see 49 C.F.R.
§§ 106.110–130, and in response the Safety Administration
solicited further public comment “for the limited purpose of
gathering information to help . . . determine whether or not to
allow fuel cell cartridges containing Division 2.1 flammable gas
to be carried aboard a passenger-carrying aircraft in checked
baggage.” Notice of Proposed Rulemaking, 77 Fed. Reg.
31,274, 31,277 (May 25, 2012). Upon consideration of the
received comments and other administrative appeals, the Safety
Administration amended the 2011 Final Rule in certain respects
but denied Lilliputian’s appeal. See Hazardous Materials:
Harmonization with International Standards, 78 Fed. Reg. 1101,
1101, 1104 (Jan. 7, 2013) (“2013 Final Rule and Denial”). The
Safety Administration gave five reasons for retaining the
prohibition: (1) “Many of the critical safety requirements of the
[hazardous materials regulations],” such as labeling and
notification requirements, “do not apply to passengers;”
(2) “Passengers are not trained to recognize potential hazards,”
and are therefore “unlikely to be aware of the safety implications
if certain commodities are subject to improper packaging or
handling;” (3) “[A]ircraft fire detection and suppression systems
do not prevent fires nor are they designed to completely
extinguish fires;” (4) The design of a product containing
                                 5

hazardous material “must be tested and demonstrate a certain
level [of] safety prior to being authorized onboard passenger-
carrying aircraft;” and (5) “[W]hen new passenger
authorizations are granted consideration must be given to the
cumulative risk of the new authorization combined with existing
authorizations.” 

Lilliputian petitions for review.
See 49 U.S.C. § 5127.

                                 II.

     Lilliputian contends that the prohibition on flammable-gas
fuel cell cartridges in checked airline baggage is arbitrary and
capricious because the Safety Administration failed to provide
any explanation of its risk assessment methodology, thereby
“making it impossible . . . to counter the . . . unstated rationale.”
Pet’r’s Br. 8. Further, Lilliputian contends, it failed to provide
a reasoned explanation for its prohibition, including failing to
explain why it declined to follow the presumption that federal
hazardous materials regulations be harmonized with
international standards, how and why it disagreed with the safety
analyses considered sufficient by international regulators, why
it disagreed with the test results of the Federal Aviation
Administration regarding fuel cell cartridge safety, and why it
prohibited butane fuel cell cartridges when it permits other, less
stringently tested items containing butane in checked baggage.

     The arbitrary and capricious standard in the Administrative
Procedure Act, 5 U.S.C. § 706(2)(A), “includes a requirement
that the agency . . . respond to ‘relevant’ and ‘significant’ public
comments,” Pub. Citizen, Inc. v. FAA, 

, 197 (D.C.
Cir. 1993) (quoting Home Box Office, Inc. v. FCC, 

,
35 & n.58 (D.C. Cir. 1977)); see also Nat’l Ass’n of Home
Builders v. EPA, 

, 1042 (D.C. Cir. 2012). An
agency’s failure to respond to relevant and significant public
comments generally “demonstrates that the agency’s decision
                                6

was not ‘based on a consideration of the relevant factors.’”
Thompson v. Clark, 

, 409 (D.C. Cir. 1984) (quoting
Citizens to Preserve Overton Park v. Volpe, 

, 416
(1971)).

     Federal hazardous materials regulations require each fuel
cell and fuel cartridge carried on a passenger aircraft to conform
to safety specifications promulgated by the International
Electrotechnical Commission (“IEC”).              See 49 C.F.R.
§§ 171.7(u), 175.10(a)(19)(vii). These specifications require
fuel cell cartridges to withstand several tests designed to ensure
durable and safe construction, including two drop tests (from
approximately four feet and six feet), a crush test (based on
approximately 220 lb.), a pressure test (based on approximately
14 lb./in2 of pressure), and a temperature test (with temperatures
ranging from -40º F to 158º F). Federal regulations permit
passengers and crew to carry in their checked baggage
“medicinal and toilet articles for personal use” that contain
flammable gases (e.g., aerosols), see 49 C.F.R. § 175.10(a)(1)(i),
without any particular safety specifications other than having a
cap or “other suitable means to prevent inadvertent release,” 

before the Safety Administration
repeatedly pointed to the IEC safety specifications imposed on
fuel cell cartridges, emphasizing that such specifications are
“extremely stringent,” and urging therefore that flammable-gas
fuel cell cartridges were safe to transport in checked airline
baggage. See Comments on Proposed Rule at 2 (Oct. 22, 2010);
Administrative Appeal at 3 (Feb. 18, 2011); Comments on
Proposed Rule at 2–3 (July 23, 2012). Its comments also
contrasted the Safety Administration’s allowance of medicinal
and toilet articles containing flammable gas in checked baggage,
even though such articles are not required to satisfy the IEC
safety specifications. See Comments on Proposed Rule at 4, 6
(Oct. 22, 2010); Administrative Appeal at 5 (Feb. 18, 2011);
                                7

Comments on Proposed Rule at 4–5 (July 23, 2012). In
promulgating the 2011 Final Rule, the Safety Administration
stated that Division 2.1 flammable gases are generally
prohibited on passenger aircraft and questioned the integrity of
such articles in passenger checked baggage. See 76 Fed. Reg. at
3337. It elaborated in denying Lilliputian’s administrative
appeal, giving five reasons in support of the prohibition. See
2013 Final Rule and Denial, 78 Fed. Reg. at 1104. Although
Lilliputian agrees with the relevance of the substantive factors
considered by the Safety Administration, it maintains that the
conclusion in support of the prohibition is arbitrary and
capricious by failing to address the rigor of the IEC safety
specifications and the comparative laxness of safety
requirements for medicinal and toiletry articles containing the
same hazardous material.

     As a general matter, an agency cannot treat similarly
situated entities differently unless it “support[s] th[e] disparate
treatment with a reasoned explanation and substantial evidence
in the record.” Burlington N. & Santa Fe Ry. Co. v. Surface
Transp. Bd., 

, 777 (D.C. Cir. 2005). On the record
before the court, the medicinal and toilet articles containing
flammable gas that are allowed in checked baggage are similarly
situated to flammable-gas fuel cell cartridges. Both contain the
same Division 2.1 class of hazardous material; if permitted in
checked baggage both would be packed by passengers and
handled by airline baggage handlers; and when stowed in
passenger luggage neither would be subject to the labeling or
notification requirements for limited-quantity cargo, see 49
C.F.R. §§ 172.315(b), 173.230(g), 175.33. Yet flammable-gas
fuel cell cartridges are prohibited from airline checked baggage
while medicinal and toilet articles containing flammable gas are
not. Compare 

with 

                                8

     The only hint that the Safety Administration considered the
disparate treatment was its statement about “cumulative risk.”
See 2013 Final Rule and Denial, 78 Fed. Reg. at 1104. The
entirety of that statement was: “Cumulative risk of additional
passenger authorizations. We believe that when new passenger
authorizations are granted consideration must be given to the
cumulative risk of the new authorization combined with existing
authorizations.” 

that can be gleaned from this
opaque statement is that the Safety Administration “considered”
the “cumulative risk” of permitting flammable-gas fuel cell
cartridges in checked baggage alongside medicinal and toilet
articles containing flammable gas. It says nothing about how it
evaluated the cumulative risk or why its evaluation led to the
prohibition of one category of similarly situated articles and not
the other. More significantly, the “cumulative risk” statement
does not respond to Lilliputian’s comments pointing out, in view
of the IEC testing regime, that medicinal and toilet articles
containing flammable gas are less safe in airline luggage than
fuel cell cartridges containing flammable gas, implying that if
only one of the two kinds of products were to be permitted in
checked baggage due to concerns about “cumulative risk,” it
should be the latter. The Safety Administration acknowledged
in promulgating the 2011 Final Rule that “fuel cell cartridges
themselves are subject to much more stringent construction,
testing, and packaging requirements than for similar articles
(e.g., aerosols),” 76 Fed. Reg. at 3335, but nowhere adequately
addressed the safety implication of that acknowledgment.

     Largely for the reasons Lilliputian suggests, we agree that
the Safety Administration has so far failed to provide the
required “reasoned explanation and substantial evidence” for
this disparate treatment. See Burlington 

. Because it is “plausible” that the Safety Administration
“can redress its failure of explanation on remand while reaching
                               9

the same result,” Black Oak Energy, LLC v. FERC, 

, 244 (D.C. Cir. 2013), and because the Safety
Administration states without contradiction that vacatur of the
prohibition would “cause unnecessary disruption for third
parties who own or manufacture” other types of fuel cell
cartridges that are permitted in checked baggage, Resp’t’s Br.
22; see N. Air. Cargo v. U.S. Postal Serv., 

, 860–61
(D.C. Cir. 2012), we remand the 2013 Final Rule for the Safety
Administration to provide further explanation for the prohibition
on airline passengers and crew carrying flammable-gas fuel cell
cartridges in their checked baggage, including its response to
Lilliputian’s comments.