Railways prevail against agricultural transport companies in dispute over STB tariffs

Railways prevail against agricultural transport companies in dispute over STB tariffs

Grain elevators and other companies with lower transport volumes are unlikely to receive a simplified process for resolving rate differences with the railroad, according to a federal appeals court ruling.

The Eighth Circuit Court of Appeals ruled Tuesday that the Surface Transportation Board (STB) exceeded its authority when it tried to simplify the resolution of rate disputes between railroads and carriers.

The ruling favors the country's largest railroad companies, which had sued against the new tariff rules. The ruling will limit the ability of freight forwarders to challenge the railroad's freight tariffs for smaller transport volumes.

Major agribusinesses and other industries that rely on railroads to move goods lost their arguments defending the STB rule. The National Grain and Feed Association, Fertilizer Institute, Corn Refiners Association, American Chemistry Council and National Industrial Transportation League all intervened in the case to support the STB's Final Offer Rate Review (FORR), which was scheduled to be completed in late 2022.

The lawsuit was filed by Union Pacific Railroad jointly with the American Association of Railroads, which represents the interests of the major railroad companies.

The three-judge panel in the Eighth Circuit Court's ruling cited the Supreme Court's Loper-Bright decision in June as well as the Administrative Procedure Act to rule that Congress does not give the STB the right to streamline the way railroads and carriers resolve disputes over freight rates. The appeals court also said the new rate review process requires the STB to choose either the railroad's or the carrier's proposed freight rates without the panel conducting any analysis itself.

Federal law requires railroads to set reasonable rates when there is no effective competition. But shippers have long complained about the length of the process, the “three benchmark test” and the high costs of the process, which can exceed any gain that could result if the STB agrees and lowers the railroad's rates.

The American Chemistry Council and the Fertilizer Institute argued in a joint brief that the STB needs a way to review shipping rates for small cases, an issue the panel has been addressing for 40 years. To provide “meaningful access” to rate reviews for small cases, the panel introduced a new method, the FORR. The chemical and fertilizer groups said FORR provides accessibility benefits that improve access for shippers with small cases. The two groups argued that the FORR process reduces the non-court costs that discourage shippers from bringing small rate cases.

“In particular, the costs incurred by shippers in paying the contested rate instead of an alternative contract rate act as a deterrent to litigation,” the fertilizer and chemical associations said in their brief. They added: “Consequently, while the case is pending, the shipper must pay a surcharge under the contested rate or not ship at all, thus losing business due to the high costs.”

The National Grain and Feed Association also filed a motion to intervene in the case, but did not file a response. The association said it was disappointed with the court's decision. “NGFA appreciates the STB's efforts to streamline the rail rate dispute resolution process. We urge the Commission to revise the rule and continue to explore a way for agricultural transport companies to challenge rail rates in a timely and cost-effective manner.”

The Washington Legal Foundation, which filed an amicus curiae brief supporting the railroads, welcomed the ruling. The group said the ruling limits the STB's authority by requiring railroads to arbitrate tariff disputes.

“The Eighth Circuit's decision correctly states that the Surface Transportation Board did not have the statutory authority to promulgate the final rule,” said John Masslon, WLF's lead trial attorney.

CSX and Canadian National Railway's U.S. subsidiaries (Grand Trunk Corporation and Illinois Central Railroad Company) have filed similar lawsuits against STB in the 11th and 7th Circuit Courts of Appeals.

Just last week, Senator Tammy Baldwin (D-Wisconsin) asked the STB to review exemptions for certain products that prohibit shippers from appealing to the STB. These include products such as paper, forest products, manufactured goods and food. Baldwin said businesses and farmers rely on fewer rail carriers, thereby lowering their rates. Removing the exemptions would allow shippers of these goods to “start dealing with the unreliability of rail service and the high cost of rail transportation,” Baldwin said.

Source: DTN