By Randy Gordon, President and CEO
The federal Surface Transportation Board (STB) in the next several weeks is expected to issue two major proposals – one of which would modify its current timely, costly and largely unworkable process for challenging unreasonable freight rates while the other would contain concepts designed to address rail carriers’ commercially unfair and nonreciprocal demurrage and accessorial tariff practices and charges imposed on rail customers.
Rate Reform: The rate-reform proposal, a long-time objective of STB Chairman Ann Begeman, is expected to draw from several recommendations of the agency’s Rate Reform Task Force, which on April 25 issued a significant study that NGFA at the time called a “thoughtful, succinct and good-faith document” that contained “several new, innovative and intriguing concepts that warrant additional consideration by the STB.” Members of NGFA’s Rail Shipper/Receiver Committee provided initial reactions to the STB Rate Reform Task Force’s report on Aug. 7 during separate meetings with each of the STB’s three members, including Begeman. During those meetings, NGFA referenced several of the STB task force’s recommendations that mirrored those proposed to the agency by NGFA when it submitted a major rail rate reform proposal for agricultural shippers and receivers in 2014.
It is believed STB’s initial rate reform proposal will contain several – perhaps two or three – of the key concepts and recommendations contained in the report. STB members have indicated to NGFA that they want to issue and begin acting on several of the task force’s proposals, while others may be considered at a subsequent time.
One of the rate-reform recommendations expected to be proposed is a so-called “final-offer decision-making” concept for “small” rail rate cases (which perhaps may be defined based upon the monetary damage claim sought by the rail customer). Under this concept, the STB would establish procedural limitations to streamline and expedite the review. The rail customer challenging a carrier’s rate and the railroad would simultaneously submit arguments on whether the carrier is market dominant, as well as what they believe to be a reasonable rate offer. The STB then would determine if the railroad had market dominance – a requirement under the Staggers Rail Act of 2000. If it did, the STB then would select either the shipper or carrier’s rate offer – without modification – under an expedited timetable (the STB task force recommended that the entire process, including an STB decision, conclude within 90 days).
Demurrage/Accessorial Tariffs: The STB also is scheduled to issue a proposal that would require rail carriers to address demurrage and accessorial tariff practices and charges that are commercially unreasonable and non-reciprocal (in that they do not apply commensurate penalties on railroads for service-related delays). The proposal follows a robust and detailed STB public hearing conducted May 22-23 that put a spotlight on egregious railroad practices. During its meetings with STB members on Aug. 7, NGFA noted that few, if any, substantive changes have been made by the Class I carriers to correct those practices since the May hearing, and as a result, action by the agency is both justified and needed by rail customers.
During an Aug. 22 meeting with the Agricultural Transportation Working Group that consists of more than 30 agricultural producer and agribusiness organizations and is co-chaired by NGFA and the American Farm Bureau Federation, STB member Martin Oberman said the agency’s May public hearing made it “pretty clear that many (railroad) practices are unreasonable and need to be reined in.” Oberman also expressed his view that demurrage and accessorial penalties should be applied by railroads only if there is clear evidence that the rail customer is at fault.
Both the rate reform and demurrage/accessorial proposals will be subject to public comment, and NGFA is committed to continuing to be proactively and extensively engaged in both matters on behalf of its member companies.