Rail Rate Mediation and Arbitration for Grain Shippers

Transportation costs have a direct impact on agricultural producers’ profits. Agricultural producers in remote areas have few transportation alternatives, and the price they receive for their products is net of transportation and other marketing and handling costs. When producers and marketers of agricultural products believe the rates they are paying for transportation are too high or uncompetitive, they need access to a dispute-settlement mechanism that is fair, easily understood, accessible, and affordable. Agricultural shippers believe the formal procedures for challenging unreasonable rail freight rates available through the Surface Transportation Board (STB) are too lengthy and expensive, with the risk not being worth the reward, effectively preventing them from accessing meaningful rate relief. Also, although affected by rail rates, agricultural producers do not have access to STB rate-challenge procedures because they typically do not ship their products to the ultimate consumer, but rather sell them to agribusinesses that arrange for transportation to the final customer. Mediation and arbitration of agricultural rail rates offer alternatives to formal STB procedures. A less formal rail rate mediation/arbitration system could potentially provide a fairer and lower cost approach to challenging rail rates. The Montana Grain Growers Association, Montana Farm Bureau Federation, and BNSF Railway Company (BNSF) have developed rail rate mediation/arbitration procedures that can be accessed by producers. Although this system is a step forward, it is limited to only one State and one railroad; no other major railroad thus far has been willing to arbitrate rail rates. A national-level rail rate mediation/arbitration system that is simple and cost-effective is needed to provide a fair and impartial forum for all grain producers and shippers.