Manufacturers Blast Moves that Could Raise LTL Rates

Editor’s note: This story contains updated information and clarifications from the June 21 print edition.

By Rip Watson, Senior Reporter

This story appears in the June 21 print edition of Transport Topics.

Shoe and clothing manufacturers are fuming at a decision that preserves less-than-truckload carriers’ freedom to raise shipping rates for shoes by up to 50% and could quadruple prices to ship clothing.

Rulings by the Commodity Classification Standards Board, or CCSB, a private industry group linked to carriers, establish classifications that are used in calculating LTL freight rates that carriers set independently. The action was announced June 11.

“We have concerns about the process CCSB has implemented,” said Nate Herman, senior director of international trade for the American Apparel and Footwear Association, the trade group that represents an industry that had $340 billion in sales last year.

The board rejected the association’s bid to reverse an earlier decision that allowed carriers to raise rates up to 50% on shoes. The board also considered new classifications for clothing, with a range of increases from 25% to 300%, and slated a vote on that plan for its October meeting.

“To us, the only reason for making these changes is to try and raise rates,” Herman said. “There is no other reason to make such a proposal.”

Members of the board group thousands of products into 18 so-called “classes” of freight to simplify the LTL rate-making process. CCSB members are named by the National Motor Freight Traffic Association. NMFTA, which considers the board to be autonomous, is composed of approximately 900 carriers.

The board groups freight into classes on the basis of the density, liability, stowability and handling characteristics of each product. The classes range from 50, for the heaviest, least valuable freight, to 500, for the lightest, highest value products.

Carriers then set their own prices independently based on the classifications set by the board, incorporating other factors such as discounts, shipment weight and the distance traveled.

“In our view, the policies, procedures and proposals would appear to be collusion among carriers to raise rates,” Herman charged.

Joel Ringer, chairman of the CCSB, called Herman’s allegation “baseless and irresponsible.”

“Carriers make no decisions with respect to the disposition of classification proposals, and they do not control or direct the CCSB in this regard,” Ringer said in an e-mail. “The CCSB is autonomous, and the decisions made on classification proposals, including the proposals on footwear, are our own.”

Shoe shipping rates were class 100 and now have been raised to 150, which means the base rate is 50% higher than class 100, Herman said.

The board proposed to place clothing in nine “classes,” ranging from 70 to 400 and replace two current classes — 75 and 100. The latest revision of clothing base rates was in 1989.

The National Retail Federation, representing stores, is also concerned about the clothing reclassification, senior vice president Jon Gold said.

NRF didn’t participate in the shoe case because it learned about the change too late, he said.

“The industry was not fully consulted on the [clothing] issue,” said Gold, who added that he was pleased the decision on those goods was postponed. “It’s important that industry be fully consulted before moving forward with the reclassification.”

CCSB spokeswoman Betty Stenaka said in an e-mail that the plan to have shoes revert to class 100 was rejected “because, based on the facts of record, the transportation characteristics of footwear . . . are consistent with CCSB policies and guidelines for the present class 150.”

The shoe shipping decision in February followed a survey by the CCSB that found shoes had an average density of 6.28 pounds per cubic foot.

The trade group did its own survey that found a higher density of about 8 pounds per cubic foot that they claimed was justification for a lower base rate, Herman said.

Ringer said AAFA did not provide relevant information.

“AAFA provided absolutely no underlying data or documentation,” Ringer said in an e-mail. “The [AAFA] study results were little more than a list of unsubstantiated average density figures, or averages of averages, for individual pairs of footwear, not for footwear as packaged and tendered for shipment by motor carrier.”

He also said CCSB officials met with the footwear group after the February meeting and were told more data would be provided, but it never happened.

“We are trying to figure out what to do now,” Herman said, noting that his group has discussed anti-trust implications of the classification process with members of Congress.

There is no mechanism to appeal rulings of the CCSB.

The trade group doesn’t keep statistics on the domestic transport cost of shoe shipments, though it has estimated the total transport cost from overseas manufacturer to the retail store can be as much as 20% of shoes’ retail price.

The clothing classification includes items such as dresses, coats, pants, shirts and underwear, but it excludes accessories such as hats, gloves and socks.