Shippers Oppose Changes In Rail Rate Rules

Chemical manufacturers and other freight railroad customers told federal regulators last week that proposed changes to the current process for challenging "excessive" rail rates would make an ineffective process even more burdensome and costly.

Although the present process for challenging rates for small shipments "is far from ideal, we believe the proposed changes will make an untenable situation even worse for shippers seeking relief from monopolistic rail practices," says Thomas E. Schick, senior director of distribution for the American Chemistry Council. "The proposal sets unrealistic eligibility standards while making an already difficult process even more time-consuming and costly."

The Staggers Rail Act of 1980, which deregulated the railroad industry, established a legal threshold of 180% of variable costs before a freight rate could be challenged by a shipper. In 1995, Congress passed legislation that directed the newly created Surface Transportation Board (STB), the successor to the former Interstate Commerce Commission, to develop "simplified guidelines" for contesting rates in cases involving small shipments.

But shippers have long complained that the process STB subsequently put in place is too costly, time-consuming, and complex to provide any relief for rail customers. In an October 2006 report, the Government Accountability Office endorsed that view, concluding that the procedure for challenging rates is "largely inaccessible and rarely used." GAO found that since the rules were passed in 1997, STB has not had one rate-challenge case go through the process (www.gao.gov/new.items/d0794.pdf).

At a Jan. 31 hearing, shippers told STB that the proposed changes would create more barriers and further discourage new cases from being filed. Railroads, however, expressed support for the new rules, testifying that they would clarify and simplify the existing process for resolving disputes of rates involving small shipments.

"We urge STB to find the proper balance between railroad pricing flexibility and reasonable rates for rail customers that, for decades, has been promised by Congress," says Schick.