Court Upholds Bottleneck Contract Exception

February 16, 2000

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The U.S. Court of Appeals for the D.C. Circuit has upheld the so-called "contract exception" to the Surface Transportation Board's bottleneck decision.

The 1996 decision stated that under most circumstances a shipper may challenge only the rate for an origin-to-destination route but not the rate charged for a particular segment of the route. But STB allowed a contract exception which essentially said shippers could challenge common carriage bottleneck segment rates if one carrier cannot provide origin to destination service and if the shipper can get a contract from the non-bottleneck carrier.
In the case just decided the shipper, FMC, shipped soda ash from western origins served only by Union Pacific to eastern destinations served by CSX and Norfolk Southern. FMC was able to secure a contract with CSX for eastern portions of its traffic and asked UP for a tariff rate on its portion. UP initially did so, but the tariff rate UP quoted was contingent on use of a CSX tariff that predated the CSX contract. Acting on a petition from FMC, the STB ordered UP to publish a common carrier bottleneck rate over its segment. UP appealed to the court.
Noting that the statute was ambiguous, the court deferred to the STB's discretion.

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