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May 28, 2007 7:55 AM, EDT

STB Asked to Delay New Limits On Freight Rate-Setting Bureaus

By Eric Miller, Staff Reporter
This story appears in the May 28 print edition of Transport Topics.
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The National Motor Freight Traffic Association and its National Classification Committee have asked the Surface Transportation Board to delay by 14 months its decision to end antitrust immunity for trucking rate bureaus.
“It will take time for the NCC to develop modified procedures, as well as business adjustments, that might have to be made by the thousands of motor carriers and shippers who presently rely on this national standard,” NMFTA said in a May 23 statement.
The NCC sets classification standards that are an important factor in carriers’ rate schedules. It assigns each commodity a numerical “rating” based on four transportation characteristics: density, stowability, ease of handling and liability for breakage or loss.
Then, motor carrier rate bureaus use the NCC classification ratings to develop rates for the various classes of freight.
Bill Pugh, executive director of the 1,100-member NMFTA, said the group’s leadership disagreed with STB’s decision, announced May 7, revoking authority of motor carriers to engage in collective rate-making and freight classification, effective Sept. 4 (5-14, p. 1).
Pugh said NCC will discuss appealing the STB decision to the U.S. Court of Appeals when the group meets June 4-5 in Arlington, Va.
“At this point, we’re reluctant to dismiss any of our options,” he said.
STB said its decision to not renew its agreements with 11 rate bureaus was a final step in the federal government’s deregulation of the trucking industry that began with passage of the Motor Carrier Act of 1980.
“By terminating our approval of the motor carrier agreements, we fulfill our responsibility to encourage fair competition, and reasonable rates by motor carriers, and usher the motor carrier industry into a fully competitive era,” STB said.
Danny Slaton, senior vice president of business development at another rate bureau, SMC3, said the group was still analyzing the effect of STB’s decision.
The company, which publishes rates for more than 100 less-than-truckload member carriers, plans to ask STB to delay its Sept. 4 implementation date but has not decided if it will formally appeal the decision, Slaton said.
The group will discuss the decision at a conference in June, he said.
And while the decision may change the way SMC3 does business, it will not spell the demise of the company or impair its core mission, Slaton said. 
He said the decision has generated a “few calls” from members, “but there has not been any hysteria.”
“It’s a hot button right now,” Josh Francque, president of less-than-truckload carrier Double D Express Inc., told Transport Topics. “It leaves us out on a limb in the way we structure our rates.”
Francque said he was convinced the STB ruling would change the way his 120-truck, regional carrier does business, but he’s not really sure just how.
“We know what we need to do to be profitable,” Francque said. But he said his firm, based in Peru, Ill., would miss the rate-structure technology it now accesses at SMC3.
Once the STB decision takes effect, it will be up to the U.S. Department of Justice to enforce any antitrust violations by the rate bureaus. Lars Kasch, software and tariff manager at Pacific Inland Tariff Bureau, in Portland, Ore., said, “We’re still trying to figure out what to do.” Pacific has 80 members.
“Change is inevitable with this decision,” Kasch said.
Transportation industry analyst Satish Jindel said while the STB ruling wouldn’t put SMC3 out of business, it could be problematic for other rate bureaus that have not expanded their member services.
Jindel, president of SJ Consulting Group, said the decision means “the freight classification system is going to have to evolve.” Some of the smaller LTLs may need to “hitch their wagons” to the pricing structure of such industry giants as FedEx Freight, UPS Freight, YRC Worldwide and Con-way Freight, he said.
Carriers such as Milan Express, Milan, Tenn., rely “somewhat” on SMC3’s pricing data, said John Singleton, the company’s assistant traffic manager. But he added that if the national classification system were to suddenly vanish, it would be “catastrophic” for companies such as Milan, an LTL and truckload carrier.
“If the national classification system goes, it would be like throwing a beach ball up in the air and everybody trying to grab it,” Singleton said.