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Surface Transportation Board forces CSX to drop "unreasonably high" rail rates

By David Hannon -- Purchasing, 8/14/2008

Score one for the captive shippers. The Surface Transportation Board issued a decision in June ordering railroad provider CSX to reduce the rates it was charging chemicals maker DuPont to carry plasticizers and plastic powders in six different lanes.

Under new guidelines established in September 2007, the STB considered the level of competition between rail and truck in the six lanes and determined that: "Although trucks are used occasionally to move the plastic powder between this origin and destination, the record evidence leads us to conclude that trucking does not provide effective competition for this movement."

The STB denied DuPont relief on a seventh lane, concluding that CSX did not have market dominance over the traffic due to the presence of barge competition, according to Thompson Hine, the law firm that represented DuPont before the STB.

According to the STB, the rate reductions will vary by route, but range from approximately 5–40% of the challenged rates. DuPont will be entitled to reparations and reduced rates totaling up to $1 million per case, or a total of up to $3 million over a five-year period.

"Freight-rail customers can rest assured that the Board will take effective action to strike down unreasonably high rail rates," STB Chairman Charles Nottingham said in a statement. In its decision, the STB wrote "While CSX has argued that there may be a transloading alternative to CSX's direct service, it has not produced convincing evidence on this record to rebut DuPont's showing that transloading is not a competitive constraint on rail rates due to price differentials, customer preference, and the lack of specialty equipment needed for carriage of synthetic powder plastics by truck."

JPMorgan analyst Thomas Wadewitz told the Associated Press that the ruling leaves the door open for other rate challenges against North American railroads, most notably Union Pacific, which he says has the biggest concentration of captive shippers. Wadewitz estimates that small, captive shipments make up about 8–16% of total carloads for U.S. rails.

The Surface Transportation Board also posts various reports filed by Class I railroads including their fuel costs and consumption, and fuel-surcharge revenues at www.stb.dot.gov.

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