Shippers gain in STB immunity decision

The board finally implements a 1998 vote that will give shippers a stronger voice in freight-classification matters.

By Staff -- Logistics Management, 3/1/2000

Two recent decisions by the federal Surface Transportation Board (STB) mean that the National Classification Committee (NCC) and motor carrier rate bureaus are here to stay--but shippers will have more say in how they operate.

In separate decisions, the STB extended the antitrust immunity of motor carrier rate bureaus and the National Classification Committee (NCC). In both cases, however, the board added conditions that shippers had been seeking: Rate bureaus will be required to adjust class rates to market-based levels, and the NCC will have to allow greater participation by shippers in the freight-classification process. Those decisions, which came just a few days before the groups' antitrust immunity was set to expire, effectively implement a December 1998 vote by the board that called for those changes.

Implementation of the 1998 vote took more than a year because the board was twice asked to delay action. First, congressional leaders requested a delay because they planned to address the antitrust status of rate bureaus in legislation. Congress did, in fact, address that issue to some extent in the Motor Carrier Safety Improvement Act of 1999. But the board's interpretation of that law was that Congress did not bar it from implementing most of its December 1998 decision. Based on that interpretation, the STB decided to move ahead with implementation. Then, late last year, the STB extended the groups' immunity for 45 days while it considered petitions from the American Trucking Associations, the National Classification Committee, and several rate bureaus for reconsideration of the December 1998 decision.

The rate bureau case addressed long-festering complaints by shippers that the rate bureaus' class rates were far in excess of actual market rates and were rarely, if ever, charged. Under the rate bureau system, commodities are grouped into thousands of classifications. Those classifications, which are ostensibly based on handling characteristics and other criteria, are critical in determining freight rates because motor carriers use them as a starting point for rate and discount negotiations.

In its decision, the board reiterated its argument from December 1998 that it would not be in the public interest to provide immunity for collective rates unless those rates were set at market levels.

In the National Classification Committee case, the board took the trucking industry to task for opposing increased participation by shippers. "At the outset, we must say that we are surprised at the unwillingness of the trucking interests even to entertain suggestions for improving the classification process," said the board in its written decision. "... To object categorically to any inquiry into the process, without even knowing what proposals might be made, reflects a closed mind and in fact confirms our initial view that some changes may be appropriate. And notwithstanding the arguments by ATA and NCC that the current state of shipper participation is adequate, in the record there is ample evidence showing that, while shippers have not been altogether excluded from the classification process, the barriers to shipper participation are strong enough to produce a bias toward classification changes that overall result in rate increases," the decision said.

The National Industrial Transportation League, the nation's largest shippers' group, hailed last month's decisions, calling them a "win for shippers." The league has been a fierce opponent of the classification system. League President Ed Emmett calls the classification system "the last vestige of the old line regulatory scheme." He says, "Just about everybody except the classification committee knows the whole system is a joke. Shippers are not given any input. A shipper can plead a case, but it never does any good. Add on top of that the rate bureaus--the rates listed have nothing to do with the real rates being charged. At the least, the whole system is misleading. At the worst, it's severely damaging."

Debra N. Phillips, executive director of the National Small Shipments Traffic Conference (NASSTRAC), a shippers' group, also applauded the decision. "We're very pleased that the STB is taking a closer look at these bodies and their processes," she says. "We're especially concerned about the NCC process, given that it is funded by the trucking industry and the decisions are made by trucking people."

The National Classification Committee did not come away from the proceedings entirely empty-handed: The STB granted it the authority to publish its standard "Uniform Bill of Lading," while cautioning that it would be sensitive to shippers' complaints about that document. The board took particular note of concerns that NASSTRAC and the Health and Personal Care Distribution Conference Inc., another shippers' group, had raised about provisions in that bill of lading that limit carriers' liability. The decision said, "We have recognized in the past that any liability limitation imposed by a bill of lading should be effected in a way that gives the shipper actual notice of the arrangement being undertaken."

Emmett, while admitting that some shippers may not agree with him, says he is not very concerned about the liability limits in the NCC's bills of lading. "In the era of partnerships, I don't think truckers are going to play 'gotcha' very often. What's happening now is that people are negotiating these limits," he says.

The STB will conduct concurrent proceedings on how to implement both decisions. Comments must be submitted to the board by April 11. Replies are due by May 11, and rebuttals are due by June 11.