WASHINGTON, March 13, 2013 – A proposal submitted by the National Industrial Transportation League (NITL) designed to replace the federal Surface Transportation Board (STB) competitive switching rules would fall far short of providing relief to agricultural shippers, according to nine agricultural organizations in a 62-page statement.

The NITL proposal is meant to increase rail-to-rail competition and make competitive switching more available to shippers. However, the proposal would, at best, potentially apply to less than 6 percent of the estimated volume of rail shipments of grains, oilseeds, processed commodities, biofuels and other agricultural commodities, the groups stated.  

Agricultural Retailers Association, National Association of Wheat Growers, National Barley Growers Association, National Chicken Council, National Corn Growers Association, National Council of Farmer Cooperatives, National Oilseed Processors Association and USA Rice Federation all signed the statement.

The statement was submitted in response to the STB’s proceeding (EP  711) seeking information and data concerning ramifications of NITL’s proposal that would replace the agency’s current rules governing competitive (reciprocal) switching between Class I railroads.

 “Because switching movements are a major conduit to maintaining a national rail freight network, railroads should not have the degree of pricing freedom on switch movements that they currently are given on long-haul rates,” the groups wrote.  “To allow such autonomy on switching will have a negative impact on the competitive fabric of the nation’s economy.”

Under the NITL proposal, to qualify for competitive switching, rail shippers would be required to meet the following four criteria:

1.     Be served by only one Class I railroad;

2.     Not have access to effective inter- or intramodal competition for the affected shipment;

3.     A working interchange “is or can be” present between the landlord Class I railroad and another carrier within a “reasonable distance” of the shipper’s facility(ies); and

4.     The switching is feasible, safe and does not impede the railroad’s ability to serve its own shippers.

Under the NITL proposal, shippers would be presumed to qualify for competitive switching if:

·       the revenue-to-variable cost (R/VC) ratio of the rate charged by the “landlord” Class I railroad from origin to destination is equal to or greater than 240 percent (or more than 75 percent of the shipper’s traffic was handled by the “landlord” railroad in the previous year); and

·       a “workable interchange” exists where a shipper’s facilities are located within the geographic boundaries of a Class I terminal, and cars regularly are switched between that carrier and the proposed alternative carrier or the interchange is located within 30 miles of the shipper’s facility(ies), and is a location where the landlord and proposed alternative carrier regularly interchange traffic.

The National Grain and Feed Association (NGFA) found that more than 94 percent of such shipments would not meet the proposal’s conclusive presumptions. 

Because the NITL proposal, as submitted, would have “limited benefits” for agricultural commodity shipments, the agricultural organizations said any new rules would need to be “significantly modified.”

At a minimum, the statement said, such changes should include:

-Reducing the NITL-proposed 240 percent R/VC threshold to 180 percent, which is the statutory level at which carriers are deemed to have quantitative market dominance over transportation rates and the STB gains jurisdiction to examine the reasonableness of rail rates.

-Using a “more liberal, case-by-case determination” to determine whether a shipper’s facility is presumed to be within a “reasonable distance” of a working interchange.

-Establishing an appropriate “access fee” – the amount to be charged for performing the switching service – which was not included in NITL’s proposal.  

But even with these and other changes, the statement said there were no guarantees that rail carriers would respond by offering competitive rates and service.


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