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Feb.8, 2016

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Q&A 100 THE JOURNAL OF COMMERCE FEBRUARY 8.2016 By Colin Barrett Q: MY PRE DECESSOR N EGO - TIATED a rate agreement with a railroad for a reduced rate that is published in a confidential document. Some time after the reduced rate was in effect, the railroad published a lower rate in a public document. But the railroad refuses to allow us to use the lower rate, basing its decision on a provision of its tariff that reads in rele- vant part as follows: "Customer-specific rates (contracts or specific quotes) will take precedence over open or non-cus- tomer-specific rates (general quotes)." I was under the impression that the payer of freight charges was legally allowed to use the lowest applicable public rate. What are your thoughts on this matter? A: THERE ARE A couple of ways to skin this particular cat. For whatever it's worth, I sus- pect you (and perhaps one or two other shippers in your circum- stance) are the direct target of the specific tariff rule you quote. If the carrier gives you a private quote for a rate lower than the general rate, it scarcely needs a rule to say the quote will take precedence. So the rule only comes into play when, as here, the railroad wants to make a low general rate available to all ship- pers except one. For the excepted shippers, it makes special higher rate quotes and then insists these will apply, as it's doing to you. The thing is, the law won't allow it to do so. Under 49 U.S.C. Section 10701(c), a railroad is free to "estab- lish any rate for transportation or other service provided by the rail carrier," subject only to certain inapplicable restrictions aimed principally at protecting connect - ing lines, not shippers. But t here is a proh ibit ion against "unreasonable discrimina- tion" against particular traffic to be found at 49 U.S.C. Section 10741(a) (1). Subsection (2) restricts that to "a like and contemporaneous service in the transportation of a like kind of traffic under substantially similar circumstances," which in practice means the same commodity moving in the same volume over the same route, with all other service aspects being likewise identical. But from what you say, I don't think that's a significant problem here. So it would appear you have legal recourse to claim the benefit of the lower tariff rate that's been established after your predecessor negotiated your special rate. I think that would be going at things the hard way, however. You refer to the negotiated rate as an "agreement," which suggests to me that it's some kind of a con- tractual arrangement. If that's the case, then there's a pretty simple solution. Contracts require the active participation of both parties. Simply withdraw your participa- tion from the contract (or from the relevant part of the contract if it cov- ers other traffic as well), and you're now free to use the newly published public rate. It may not be altogether so straightforward, of course. Perhaps the railroad is tying your access to other negotiated rates, which may be below the public rates, to the one on this particular movement, and will retaliate by eliminating those other advantageous rates. That's some - thing you'll have to negotiate. While the anti-discrimination clause of the law appears to prohibit it from charg- ing you more than anyone else for this service, it may well not be in your best interest to invoke that law in the cir- cumstances I've described. Presuming, though, that you don't have unrelated traffic that may be at risk here, the railroad can't legally enforce the higher rate on you once you withdraw your par- ticipation in whatever agreement you have with it. In fact, in my opinion, the car- rier was imprudent to even suggest this to you. Why would any sensible supplier of services seek to pur- posely antagonize a customer with such an unreasonable approach? I suspect this was simply a matter of the right hand not realizing what the left was doing within the railroad's organizational hierarchy. In any event, let it be known to the carrier representatives with whom you've been talking that you're not going to tolerate this situ- ation, and that you want (and are entitled to) full access to all rates the railroad is making available to its general shipper base. Once you can- cel the agreement at the heart of this problem, you should have no further trouble from it about applying the generally applicable tariff rate, that annoying tariff rule be hanged. JOC Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010. IS A RATE FOR ONE A RATE FOR ALL? Why would any sensible supplier of services seek to purposely antagonize a customer with such an unreasonable approach?

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