Report: Process for contesting shipping rates must be updated

A report from the National Research Council's Transportation Research Board said regulations and procedures are out of date and failing to meet the needs of many rail shippers in today's marketplace, the council said on Wednesday.

The report said that while a majority of grain, coal and chemicals rely on railway shipping, rising costs have been more extensive than general rises in inflation. The Staggers Rail Act of 1980 does allow shippers to contest rates, but the council found the process arbitrary and unreliable. The council suggests that the Department of Transportation develop and test a more effective system.

The Surface Transportation Board (STB) oversees railroads and is the main regulatory body. It also is charged with judging rate disputes, and the lengthy litigation process often keeps shippers from pursuing this option.

“The committee’s two main recommendations go hand-in-hand,” committee Chairman Richard Schmalensee, professor emeritus of management and economics at the Massachusetts Institute of Technology, said. “Currently, burdensome STB rate hearings compensate for an unreliable initial process for identifying unusually high rates, and in effect, they safeguard railroad revenues by making it too costly for most shippers to litigate a case. So a more credible method for identifying unusually high rates would permit the use of less-burdensome arbitration procedures, while not risking the adequacy of railroad revenue.”

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Massachusetts Institute of Technology

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