Justified Rates

(Traffic World Online – John Gallagher)

As LTL shippers take advantage of the best leverage over transportation rates they’ve had in decades, they’re finding their influence over how those rates are determined may have taken a hit.

The first arbitration proceeding carried out under the auspices of a revamped National Motor Freight Traffic Association – now operating without the benefit of antitrust immunity, which was eliminated by Surface Transportation Board in December 2007 – revealed that shippers might have to work harder to show why the classification of their products should or should not be changed.

Since 1956, the National Motor Freight Classification has served as the benchmark against which rates are determined, with carriers determining rates on a scale based on a product’s classification. And a classification change often leads to an increase or decrease in the corresponding base transportation rate.

“When they enjoyed antitrust immunity, the NMFTA had the burden of proving the reasonableness of a classification change – that’s out now,” said Fritz R. Kahn, who arbitrated the classification case.

“Effectively the burden has shifted to shippers to prove that the classification is not reasonable.”
The January 22 decision, which involved changing the classification of paint products, was mundane: non-hazardous paint products will keep the same classification, and those deemed to be hazardous will be rated one class higher. But with an estimated 60% of the paints transported now considered to be hazardous, upping the classification – and subsequently the rate which carriers would charge to move them – may not be a small consequence for the $20 billion paint industry. Read more here.