NAPM InfoEdge

April 1997, Vol. 2 No. 8

Understanding Deregulation and Tariffs

Author(s): Richard L. Pinkerton, Ph.D., C.P.M., Edward J. Marien, Ph.D.

The first wave of transportation deregulation came with the Air Cargo Act of
1977, followed by the Staggers Rail Act of 1980, the Motor Carrier Act of 1980,
and the Shipping Act of 1984. These Acts substantially reduced the rules of entry,
price discounting, route offerings, service offerings, and the role of the Interstate
Commerce Commission (ICC — which became defunct) in regulating the air,
truck, rail, and water carriers involved in interstate commerce. These acts
provided freedom and ease to negotiate rates, expand private contracting, and
offer other services.

However, these acts also brought problems and instability. For example, the
ensuing increased competition in motor trucking brought about discounting
practices which, in turn, led to bankruptcy. After several Supreme Court cases (in
particular the Maislin and Transcon cases), Congress passed the following
amendments:

1. The Negotiated Rates Act of 1993 (NRA). Effective December 3,

1993, this Act prohibits motor common and contract carriers from
providing a tariff rate reduction to the nonpayer of freight charges except
under certain rules of disclosure to the party responsible for paying (or his
agent), when indicated on the freight document and for performance of a
particular service.
2. The Transportation Industry Regulatory Reform Act of 1994
(TIRRA). Requires motor carriers to provide, on request of the shipper, a
written or electronic copy of the rate, classification, rules, practices, and
any other information affecting the rate. This requirement is also known as
"verified pricing documentation." This act also eliminated the (then) ICC
rules for motor carrier contracting.
3. The Federal Aviation Administration Act of 1994. An aviation bill
rider, this Act takes the states out of the intrastate economic regulation of
motor carriers. It carries the provisions of the Motor Carrier Act of 1980
down to the state level, i.e., states cannot regulate intrastate motor
carriers, unless the motor carriers in the state petition the state to
exercise regulation.

The latest legislation is the ICC Termination Act (ICCTA) of 1995 (see box on
page 9).
Understand "Common Law" Price Lists and Rules Tariffs

Carriers (motor and rail) can still include rules tariffs in their "common law" price
lists, which allow for amendments without the knowledge or consent of the
shipper. For example, references to classification tariffs mean that the shipper is
subject to the rules related to uniform bill of lading forms, liability limits, package
specifications, released rates, and other rules and charges in the National Motor
Freight Classification (NMFC) for trucks, the Uniform Freight Classification (UFC)
for rail, and loading rules published in the Association of American Railroads
(AAR) loading pamphlets.

These rules tariffs include provisions for surcharges, various value-added ancillary
services for which the carrier assesses additional charges. Many carriers, instead
of relying upon the NMFC, are now publishing their own rules tariffs. The new law
also enables carriers and shippers to develop their own unique bills of lading
rather than using the uniform bills of lading incorporated in the NMFC or in the
Uniform Commercial Code of states.

Know Where Contract Carriage Fits In the ICCTA

Two precepts of the ICC Termination Act (ICCTA) are that the federal government
has jurisdiction to oversee (as opposed to regulate) U.S. transportation policy,
and that carriers provide non-discriminatory service at reasonable charges. Some
attorneys and practitioners believe that under the policies of ICCTA, all carriers
are now common carriers with the right to develop long-term contracts (contract
carriage). However, under deregulation these carriers aren't required to file tariffs
with any agency.

The question arises as to how shippers, receivers, and third-parties will know if they are being
discriminated against by other service/price offerings? How can one use contract carriage to
legally discriminate among shippers? Contracts are a legal means as long as distinctive services
are identified in the contracts. The answers to these questions may lie in the courts. Parties who
claim to be injured by discriminatory services and prices may only be able to know if and when
court cases force discovery. If this is the case, further legislation may be needed.

THE ICC TERMINATION ACT OF 1995 (ICCTA)

Effective January 1, 1996, the Interstate Commerce Commission (ICC) was abolished, and limited functions were

transferred to the newly created Surface Transportation Board (the Board), within the Department of Transportation

(DOT). ICCTA is a massive revision of the Interstate Commerce Act. The major changes relevant to purchasing

include:

 Elimination of railroad tariff filings (but rail carriers must publish rates,
including a 20-day notice of rate increases, even though the Act does not
specify where the rates are to be published).
 Limitation of the authority of the Board to set minimum rail rates, and
investigate and suspend new rail rates except to prevent irreparable harm.
The Board also cannot initiate rail rate investigations but can respond to
complaints.
 Use of stand-alone cost (SAC) methods to determine rail rate
reasonableness (and other methods when SAC preparation is too costly).
 Repeal of The Elkins Act against rail rebates, along with the commodities
clause and special regulations for transportation of recyclable or recycled
materials.
 Retention of the motor carrier, water carrier, freight forwarder, and
broker provisions of TIRRA of 1994 which eliminated much of the tariff
filing and rate regulation for interstate transportation.
 Retention and some expansion of the provisions of the Federal Aviation
Administration Reauthorization Act of 1994 and the Negotiated Rates Act of
1993 (NRA).
 Inclusion of domestic port-to-port water and intermodal motor-water
carriage regulations under the Board from the Federal Maritime
Commission.
 Requirement that collective rate-making agreements be reviewed every
three years and tested for public interest.
 Modification of the 180-day time limit to file claims to include 180 days
from the start of rebillings by carriers.
 Substitution of market determined rates to prevail instead of "rate
reasonableness" and "tariff requirements," which now apply only to
household goods.
 Simplified licensing procedure for new carriers, freight forwarders, and
brokers, who register with the Federal Highway Administration (FHWA).
 Eliminates the distinctions between common and contract carriers.
 Authority for transportation carriers to offer line-haul and various
accessorial, value-added services either under common carriage for the
general public or under contracts for specific services.
 Broadens the term "transportation" to include packing and unpacking
activities.

 Removes the states from any obligation to determine and regulate tariffs.