16316 Federal Register / Vol. 72, No. 64 / Wednesday, April 4, 2007 / Proposed Rules 

1See Contract Rates on Rugs and Carpeting from 

Amsterdam, N.Y., to Chicago, 313 I.C.C. 247, 254 

(1961); Guaranteed Rates from Sault Ste. Marie, 

Ontario, Canada, to Chicago, 315 I.C.C. 311, 323 

(1961). 

2Change of Policy Railroad Contract Rates, Ex 

Parte No. 358–F (ICC served Nov. 9, 1978). 

3See former 49 CFR 1039.1 (1979). 

4H.R. Rep. No. 96–1035, 96th Cong., 2nd Sess. 

(May 16, 1980) at 57 (House Report); see also S. 

Rep. No. 96–470, 96th Cong., 1st Sess. (Dec. 7, 

1979) at 24 (Senate Report) (the changes are 

‘‘intended to clarify the status of contract rate and 

service agreements in an effort to encourage carriers 

and purchasers of rail service to make widespread 

use of such agreements’’). 

5House Report at 58; see also Senate Report at 

24. 

6Pub. L. No. 96–448, 94 Stat. 1895 (1980). 

7House Report at 58. 

8Senate Report at 9. 

DEPARTMENT OF TRANSPORTATION 

Surface Transportation Board 

49 CFR Parts 1300 and 1313 

[STB Ex Parte No. 669] 

Interpretation of the Term ‘‘Contract’’

in 49 U.S.C. 10709 

AGENCY: Surface Transportation Board, 

DOT. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Surface Transportation 

Board seeks public comments on a 

proposal to interpret the term ‘‘contract’’

in 49 U.S.C. 10709 as embracing any 

bilateral agreement between a carrier 

and a shipper for rail transportation in 

which the railroad agrees to a specific 

rate for a specific period of time in 

exchange for consideration from the 

shipper, such as a commitment to 

tender a specific amount of freight 

during a specific period or to make 

specific investments in rail facilities. 

DATES: Comments are due by June 4, 

2007. Reply comments are due August 

2, 2007. 

ADDRESSES: Comments may be 

submitted either via the Board’s e-filing 

format or in the traditional paper 

format. Any person using e-filing should 

comply with the instructions at the EFILING link on the Board’s Web site, at 

http://www.stb.dot.gov. Any person 

submitting a filing in the traditional 

paper format should send an original 

and 10 copies to: Surface Transportation 

Board, Attn: STB Ex Parte No. 669, 395 

E Street, SW., Washington, DC 20423–

0001. 

Copies of written comments will be 

available from the Board’s contractor, 

ASAP Document Solutions (mailing 

address: Suite 103, 9332 Annapolis Rd., 

Lanham, MD 20706; e-mail address: 

asapdc@verizon.net; telephone number: 

202–306–4004). The comments will also 

be available for viewing and selfcopying in the Board’s Public Docket 

Room, Room 755, and will be posted to 

the Board’s Web site at http:// 

www.stb.dot.gov. 

FOR FURTHER INFORMATION CONTACT: 

Joseph H. Dettmar at 202–245–0395. 

[Assistance for the hearing impaired is 

available through the Federal 

Information Relay Service (FIRS) at 1–

800–877–8339.] 

SUPPLEMENTARY INFORMATION: Until the 

late 1970s, the Board’s predecessor, the 

Interstate Commerce Commission (ICC), 

had found contract rates between a 

railroad and a shipper to be per se 

unlawful. They were regarded as a 

destructive competitive practice that 

would have the effect of damaging 

existing rate structures and reducing 

competition.1 In 1978, the ICC changed 

course, issuing a policy statement 

acknowledging that contract rates may 

be beneficial in many circumstances 

because ‘‘a shipper is guaranteed a 

certain rate for the period of the contract 

while the carrier knows what service 

that shipper will receive.’’ 2 In that 

proceeding, the ICC adopted the 

following definition of a rail ‘‘contract 

rate’’: 

a railroad freight rate arrived at through 

mutual agreement between a railroad * * * 

and a shipper in which the railroad agrees to 

provide service for a given price and the 

shipper agrees to tender a given amount of 

freight during a fixed period.3

Rather than finding all such agreements 

lawful, however, the ICC undertook to 

review the legality of contract rates on 

a case-by-case basis. 

Congress viewed the ICC’s changed 

policy as insufficient, because it had ‘‘a 

number of restrictions and uncertainties 

and [had] resulted in the limited use of 

contracts.’’ 4 To ensure that shippers 

and railroads would be free to enter into 

rail transportation contracts ‘‘without 

concern about whether the ICC would 

disapprove a contract,’’ 5 in the Staggers 

Rail Act of 1980 (Staggers Act),6

Congress amended the statute to provide 

that railroads ‘‘may enter into a contract 

with one or more purchasers of rail 

services to provide specified services 

under specified rates and conditions.’’

Former 49 U.S.C. 10713(a) (1995) (now 

codified at 49 U.S.C. 10709(a)). When 

originally enacted, the provision further 

stated that ‘‘a rail carrier may not enter 

into a contract with purchasers of rail 

service except as provided in this 

section.’’ Former 49 U.S.C. 10713(a) 

(1995). 

Congress also expressly removed all 

matters and disputes arising from rail 

transportation contracts from the ICC’s 

(and now the Board’s) jurisdiction. See 

former 49 U.S.C. 10713(i) (1995) (now 

codified at 49 U.S.C. 10709(c)). If the 

parties have a dispute regarding such a 

contract—such as whether there has 

been adequate performance or whether 

the contract is void because it was 

signed under duress—such matters are 

to be decided by the courts under 

applicable state contract law. See former 

49 U.S.C. 10713(i)(2) (1995) (now 

codified at 49 U.S.C. 10709(c)(2)). 

Congress also explained that, if someone 

believes that a contract is 

anticompetitive, ‘‘the antitrust laws are 

the appropriate and only remedy 

available.’’ 7 Congress considered the 

contract rate provision of the Staggers 

Act to be ‘‘among the most important in 

the bill.’’ 8 But there is no clear 

distinction in the statute or our 

precedent between a contract and a 

common carrier rate. 

In a recent proceeding, Kansas City 

Power & Light Company v. Union 

Pacific Railroad Company, STB Docket 

No. 42095 (KCPL), the Board asked the 

parties to submit briefs to discuss a 

hybrid pricing mechanism that the 

carrier designated a common carrier 

pricing arrangement, but could be 

viewed as a rail transportation contract. 

See Kansas City Power & Light Co. v. 

Union Pac. R.R., STB Docket No. 42095 

(STB served July 27, 2006). The parties 

took the position that the rates at issue 

were common carrier rates subject to the 

Board’s jurisdiction. The parties cited 

agency precedent for the proposition 

that a common carrier rate ‘‘is nothing 

more than a special kind of contract 

between a carrier and its shippers,’’

citing National Grain & Feed Assoc. v. 

BN RR. Co., et al., 8 I.C.C.2d 421, 437 

(1992), and whether a contract or 

common carrier rate exists has been 

examined on a case-by-case basis in 

light of the parties’ intent, citing 

Aggregate Volume Rate on Coal, Acco, 

UT to Moapa, NV, 364 I.C.C. 678, 689 

(1981) (Utah). The parties also pointed 

out that the agency has in the past stated 

that the purpose of allowing for contract 

rates is to establish negotiated, mutually 

agreeable rates to which parties intend 

to be bound. See Utah, 364 I.C.C. at 689; 

see also Product and Geographic 

Competition, 2 I.C.C.2d 1, 11 (1985); 

Market Dominance Determinations, 365 

I.C.C. 118, 125 (1981). The Union 

Pacific Railroad Company (UP) also 

argued that it can enter into any kind of 

bilateral agreement with a shipper, but 

maintain Board jurisdiction by labeling 

the agreement a common carrier rate 

rather than a contract rate. It contended 

that a carrier has the authority to 

designate what type of rate it is 

establishing, based on section 10701(c), 


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Federal Register / Vol. 72, No. 64 / Wednesday, April 4, 2007 / Proposed Rules 16317 

9See STB Docket No. 42095, UP’s Response to 

Order to Show Cause, at 8 (filed Sept. 25, 2006). 

10A unilateral contract is one in which one party 

makes an express engagement or undertakes a 

performance, without receiving in return any 

express engagement or promise of performance 

from the other. The essence of a unilateral contract 

is that neither party is bound until the promisee 

accepts the offer by performing the proposed act. 

Black’s Law Dictionary 277 (6th abr. Ed. 1991). 

11See 49 CFR 1300.2 (‘‘A rail carrier must 

disclose to any person, upon formal request, the 

specific rates(s) requested * * *. as well as all 

charges and service terms * * *.’’). 

12See, e.g., Canadian National, et al.—Control—

Illinois Central, et al., 4 S.T.B. 122, 149 (1999) (‘‘As 

we explained in the UP/SP decision affirmed by the 

court, there are three elements, all of which are 

present here, that each make tacit collusion 

unlikely for markets in which two railroads operate. 

First, tacit collusion cannot flourish where, as in 

railroading, rate concessions can and are made 

secretly through confidential contracts.’’); see also 

Water Transport Ass’n v. ICC, 722 F.2d 1025 (2d 

Cir. 1983) (‘‘[I]t has long been recognized under the 

antitrust laws that public disclosure of contract 

terms can undermine competition by stabilizing 

prices at an artificially high level.’’); see generally 

Petition To Disclose Long-Term Rail Coal Contracts, 

ICC Ex Parte No. 387 (Sub-No. 961) (ICC served July 

29, 1988) (lengthy discussion of the confidentiality 

of rail transportation contracts). 

arguing ‘‘[u]nless a specific prohibition 

applies, ‘a rail carrier may establish any 

rate for transportation or other service 

provided by the rail carrier.’ Rail 

carriers thus have broad flexibility to 

design common carrier offerings as 

alternatives to rail transportation 

contracts in response to business 

needs.’’ 9 Because the parties could have 

reasonably relied on prior agency 

precedent to conclude that this kind of 

hybrid pricing mechanism is subject to 

Board jurisdiction, we concluded that it 

would be inappropriate to set aside or 

reexamine that ICC precedent in that 

adjudication. 

Nevertheless, we have serious 

concerns about the lack of any clear 

demarcation between contract and 

common carrier rates because of the 

boundaries on our jurisdiction. The 

carrier in the KCPL proceeding has 

crafted a hybrid pricing mechanism that 

appears to have all of the characteristics 

of a rail transportation contract, but 

avoids some important consequences of 

entering into such a contract by its 

choice of label. Traditionally, common 

carrier pricing has been a holding out to 

the public to provide a specified 

transportation services for a given price 

that a shipper accepts by tendering 

traffic. Under these unilateral 

contracts,10 the carrier has the right to 

change the common carrier rates or 

terms upon 20 days’ notice under 49 

U.S.C. 11101(c). In other words, where 

there is no mutuality of consideration, 

a carrier can unilaterally withdraw one 

offer and replace it with another. 

The new pricing structures we are 

witnessing as reflected in the KCPL 

proceeding, however, contain a 

mutuality of obligation between the 

carriers and shippers that appear to 

have the hallmarks of a contractual 

relationship. These bilateral agreements 

mutually bind both the shipper and the 

carrier for a given period of time. In 

exchange for some sort of consideration 

from the shipper, the carrier commits to 

a specific rate or service for a specific 

term. While Congress intended to 

permit carriers to have the pricing 

flexibility to enter into these kinds of 

agreements, we believe that Congress 

also intended for these contractual 

agreements to be confidential, outside 

Board jurisdiction, and subject to the 

scrutiny of the antitrust laws, rather 

than regulation under the Interstate 

Commerce Act. 

We also have concerns that the 

increased used of these hybrid pricing 

mechanisms could create an 

environment where collusive activities 

in the form of anticompetitive price 

signaling could occur. Whereas the 

terms and conditions of common carrier 

rates must be publicly disclosed under 

section 11101,11 the terms of a rail 

transportation contract are to be kept 

confidential, a factor that makes 

collusion in this highly concentrated 

industry more difficult.12 Thus, a 

carrier’s hybrid pricing mechanism may 

not contain the same protections against 

collusion as do traditional confidential 

transportation contracts. An important 

competitive benefit of contracts is that 

they often enable shippers to obtain 

service commitments and lower rates 

that carriers might not otherwise offer 

through the public tariff process. 

We also question whether the position 

advanced by UP that these sorts of rates 

are authorized by section 10701(c) is 

consistent with the statutory scheme. 

Read in context with the other 

provisions of section 10701, we believe 

that subsection (c) addresses the level of 

the rate that a carrier may set in the first 

instance, and does not allow the carrier 

to control the designation of the type of 

rate that is involved. Moreover, under 

the railroad’s interpretation, there 

would appear to be no type of 

agreement between a carrier and a 

shipper—no matter how long the term 

or how individually tailored or bilateral 

the responsibilities created—that a 

carrier could not unilaterally label 

common carrier rate and service terms. 

If that were so, the contract provision in 

section 10709 would become largely 

superfluous. 

Similarly, the carrier’s interpretation 

would render section 10722 redundant. 

In that provision, Congress expressly 

authorized rail carriers to establish 

premium charges in common carrier 

rates for special services or special 

levels of service in order to encourage 

more efficient use of freight cars. See 49 

U.S.C. 10722. If, however, section 10701 

authorizes common carrier tariffs that 

embrace any kind of special rates and 

terms, it would not have been necessary 

for Congress to separately authorize 

special rates in section 10722. 

We are inclined to find that a more 

reasonable interpretation of the statute 

is that section 10701 does not authorize 

carriers to enter into either special 

common carrier rates or bilateral 

contractual agreements. Both the 

authority for, and limitations on, those 

types of rates are set forth in sections 

10722 and 10709, respectively. Section 

10709, in turn, removes those contracts 

from the regulatory scheme associated 

with common carrier service. 

In light of the above concerns, we 

seek public comment on our proposed 

interpretation of the term ‘‘contract’’ in 

section 10709 as embracing any bilateral 

agreement between a carrier and a 

shipper for rail transportation in which 

the railroad agrees to a specific rate for 

a specific period of time in exchange for 

consideration from the shipper, such as 

a commitment to tender a specific 

amount of freight during a specific 

period or to make specific investments 

in rail facilities. Under the proposed 

interpretation, notwithstanding any 

carrier representation that the rate 

specified in the agreement is a common 

carrier rate, such a bilateral agreement 

would be regarded by the Board as a rail 

transportation contract under section 

10709 and therefore outside the Board’s 

jurisdiction. See Columbia Gas 

Transmission Corp. v. FERC, 404 F.3d 

459, 463 (D.C. Cir. 2005) (‘‘jurisdiction 

cannot arise from the absence of 

objection, or even from affirmative 

agreement. To the contrary, as a 

statutory entity, [the agency] cannot 

acquire jurisdiction merely by 

agreement of the parties before it.’’); see 

also Weinberger v. Bentex Pharms., Inc., 

412 U.S. 645, 652 (1973) (only Congress, 

not parties, may confer jurisdiction). 

Though we need not seek public 

comments before issuing an 

interpretative rule of this nature, we do 

so here to ensure that we have fully 

considered the issues and ramifications 

before taking this action. We do not 

intend to stifle innovation in 

transportation markets or otherwise 

disadvantage any party. 

To the extent this interpretation could 

be seen as contradicting past agency 

statements regarding whether a bilateral 

agreement can constitute a common 

carrier rate, we would apply this 


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16318 Federal Register / Vol. 72, No. 64 / Wednesday, April 4, 2007 / Proposed Rules 

interpretation prospectively only. 

However, we do not want to create 

incentives for a carrier to rush to put 

into place as many rates as possible in 

hybrid ‘‘common carrier’’ agreements 

during the period of unavoidable delay 

associated with seeking public 

comments. Therefore, should we adopt 

this interpretative rule, we intend to 

apply the rule to all agreements entered 

into after the date of publication of this 

decision in the Federal Register. Parties 

are hereby placed on notice that if this 

proposal is adopted, the reasonableness 

of a rate reflected in a bilateral 

agreement entered into after this date 

will be treated as a confidential contract 

governed by section 10709 and outside 

the Board’s jurisdiction. 

Our proposed changes to the Code of 

Federal Regulations are set forth in the 

appendix. Parties are specifically 

invited to comment on the proposed 

rules, particularly concerning 49 CFR 

1313.1(c). Parties are asked to consider 

whether the proposed changes would 

have unforeseen consequences for 

agricultural contracts and whether there 

are differences between agricultural and 

other types of rail transportation 

contracts. 

Pursuant to 5 U.S.C. 605(b), the Board 

certifies that this action will not have a 

significant economic effect on a 

substantial number of small entities 

within the meaning of the Regulatory 

Flexibility Act. 

This action will not significantly 

affect either the quality of the human 

environment or the conservation of 

energy resources. 

Authority: 49 U.S.C. 721, 49 U.S.C. 10709. 

Decided: March 28, 2007. 

By the Board, Chairman Nottingham, Vice 

Chairman Buttrey, and Commissioner 

Mulvey. 

Vernon A. Williams, 

Secretary. 

For the reasons set forth in the 

preamble, the Surface Transportation 

Board proposes to amend part 1300 and 

1313 of title 49, chapter x, of the Code 

of Federal Regulations as follows: 

PART 1300—DISCLOSURE, 

PUBLICATION, AND NOTICE OF 

CHANGE OF RATES AND OTHER 

SERVICE TERMS FOR RAIL COMMON 

CARRIAGE 

1. The authority citation for Part 1300 

continues to read as follows: 

Authority: 49 U.S.C. 721(a) and 11101(f). 

2. Amend § 1300.1 by adding 

paragraphs (c)(1) and (c)(2) to read as 

follows: 

§ 1300.1 Scope; definitions. 

* * * * * 

(c) * * * 

(1) The term contract in 49 U.S.C. 

10709 is defined as any bilateral 

agreement between a carrier and a 

shipper for rail transportation in which 

the carrier agrees to a specific rate for 

a specific period of time in exchange for 

consideration from the shipper, such as 

a commitment to tender a specific 

amount of freight during a specific 

period or to make specific investments 

in rail facilities. 

(2) Notwithstanding any 

representation that a rate specified in an 

agreement is a common carrier rate, a 

bilateral agreement as described in 

paragraph (c)(1) of this section will be 

treated by the Board as a rail 

transportation contract authorized 

under 49 U.S.C. 10709 and therefore 

outside the Board’s jurisdiction. 

* * * * * 

PART 1313—RAILROAD CONTRACTS 

FOR THE TRANSPORTATION OF 

AGRICULTURAL PRODUCTS 

3. The authority citation for Part 1313 

continues to read as follows: 

Authority: 49 U.S.C. 721(a) and 10709. 

4. Amend § 1313.1 by revising the 

first sentence of paragraph (c) to read as 

follows: 

§ 1313.1 Scope; definitions of terms. 

* * * * * 

(c) For purposes of this part, the term 

contract means a contract as defined in 

49 CFR 1300.1(c), including any 

amendment thereto, to provide specified 

transporation of agricultural products 

(including grain, as defined in 7 U.S.C. 

75 and products thereof). * * * 

[FR Doc. E7–6215 Filed 4–3–07; 8:45 am] 

BILLING CODE 4915–01–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 635 

[Docket No. 070330073–7073–01; I.D. 

030507A] 

RIN 0648–AU87 

Atlantic Highly Migratory Species; 

Atlantic Bluefin Tuna Quota 

Specifications and Effort Controls 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Proposed rule; request for 

comments; notice of public hearings. 

SUMMARY: NMFS proposes initial 2007 

fishing year specifications for the 

Atlantic bluefin tuna (BFT) fishery to set 

BFT quotas for each of the established 

domestic fishing categories and to set 

effort controls for the General category 

and Angling category. This action is 

necessary to implement 

recommendations of the International 

Commission for the Conservation of 

Atlantic Tunas (ICCAT), as required by 

the Atlantic Tunas Convention Act 

(ATCA), and to achieve domestic 

management objectives under the 

Magnuson-Stevens Fishery 

Conservation and Management Act 

(Magnuson-Stevens Act). A minor 

administrative change to the permit 

regulations is also proposed. NMFS 

solicits written comments and will hold 

public hearings in April 2007 to receive 

oral comments on these proposed 

actions. 

DATES: Written comments must be 

received on or before May 4, 2007. 

The public hearings dates are: 

1. April 24, 2007, 7 p.m. to 9 p.m., 

Morehead City, NC. 

2. April 26, 2007, 6:30 p.m. to 8:30 

p.m., West Islip, NY. 

3. April 27, 2007, 3:30 p.m. to 5:30 

p.m., Gloucester, MA. 

ADDRESSES: Comments may be 

submitted through any of the following 

methods: 

• E-mail: 07BFTSPECS@noaa.gov. 

Include in the subject line the following 

identifier: ‘‘Comments on 2007 Atlantic 

bluefin tuna specifications.’’

• Federal e-Rulemaking Portal: http:// 

www.regulations.gov. 

• Mail: Sarah McLaughlin, Highly 

Migratory Species Management 

Division, Office of Sustainable Fisheries 

(F/SF1), NMFS, One Blackburn Dr., 

Gloucester, MA 01930. 

• Fax: (978) 281–9340. 

The hearing locations are: 

1. Morehead City — Carteret 

Community College (Joselyn Hall, H.J. 

McGee, Jr. Building), 3505 Arendell 

Street, Morehead City, NC 28557. 

2. West Islip — West Islip Public 

Library, 3 Higbie Lane, West Islip, NY 

11795. 

3. Gloucester — NMFS, One 

Blackburn Drive, Gloucester, MA 01930. 

Supporting documents including the 

Environmental Assessment, Initial 

Regulatory Flexibility Analysis, and 

Regulatory Impact Review are available 

by sending your request to Sarah 

McLaughlin at the mailing address 

specified above. 

FOR FURTHER INFORMATION CONTACT: 

Sarah McLaughlin, 978–281–9260. 


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