ARLINGTON, Nov. 18, 2019 — The National Grain Feed Association (NGFA) on Nov. 12 submitted two statements to the Surface Transportation Board (STB) largely supporting, but outlining recommendations to improve further, the agency’s proposals designed to reform the process available to shippers to challenge unreasonable freight rail rates.
In its first statement, the NGFA supported the agency’s proposal to implement a streamlined “final-offer rate review” process that would provide rail customers with a more workable approach to challenge unreasonable freight rail rates within an expedited time frame.
“NGFA-member companies believe unreasonably high rail rates have become more prevalent and significant given the rapid consolidation of the North American freight rail marketplace and the implementation of the so-called ‘precision scheduled railroad’ operating model by six of the seven Class I railroads, which reinforces the importance and timeliness” of the STB’s proposal, the NGFA wrote. “As NGFA’s rail arbitration system has shown that merely having realistic access to an effective forum for resolving disputes in a timely, fair and cost-effective manner can help discipline business conduct without cases ever being filed.”
The NGFA noted that in 2014 it had developed and submitted to the STB its own version of a new, simplified rate-challenge methodology intended to be workable for agricultural rail users. Subsequently, a 2015 report by the National Academy of Sciences’ Transportation Research Board also found the STB’s rate-challenge processes to be complex, time-consuming and costly, with no agricultural shipper having filed a rate challenge in nearly 40 years.
“The NGFA continues to strongly support efforts by the (STB) to improve its rules for reviewing the reasonableness of railroad rates and to make them more workable, accessible and useful for agricultural shippers,” the NGFA wrote.
The NGFA recommended that the STB make several improvements to its “final-offer rate review” process proposal before issuing a final rule, including removing the proposed $4 million cap on rate relief over a two-year period and developing guidance for shippers on how to utilize the new process effectively. They are outlined here.
In a second statement submitted to the STB on Nov. 12, the NGFA strongly supported – but recommended several significant changes to – the agency’s proposal to develop and adopt a streamlined approach that shippers could use to demonstrate that a freight railroad has “market dominance” over a given transportation movement, which is a prerequisite before a rail customer can challenge the reasonableness of a rail rate. Among other things, the NGFA recommended that the STB improve its method for calculating whether a railroad revenue-to-variable cost ratio exceeds 180 percent, which must be met before a rate can be challenged, as well as modifying its proposed standard for determining whether trucks offer a cost-competitive alternative to rail for hauling grains and other agricultural products. NGFA recommendations to the proposal are outlined here.
The NGFA, established in 1896, consists of more than 1,000 grain, feed, processing, exporting and other grain-related companies that operate more than 7,000 facilities and handle more than 70 percent of all U.S. grains and oilseeds. Its membership includes grain elevators; feed and feed ingredient manufacturers; biofuels companies; grain and oilseed processors and millers; exporters; livestock and poultry integrators; and associated firms that provide goods and services to the nation’s grain, feed and processing industry. The NGFA also consists of 33 affiliated State and Regional Grain and Feed Associations, and is co-located and has a strategic alliance with North American Export Grain Association, and a strategic alliance with Pet Food Institute.