301009 

 ENTERED 

Office of Proceedings 

 August 20, 2020 

 Part of 

 Public Record 

USDA 

iiiiiiiii 

United States Department of Agriculture 

Office of the Secretary 

Washington D.C. 20250 

August 20, 2020 

The Honorable Ann D. Begeman 

Chair 

Surface Transpmtation Board 

395 E Street SW 

Washington, D.C. 20423 

RE: STB Ex Parte 765, Petition for Rulemaking to Establish an Alternate Voluntary 

Arbitration Program for Small Rate Disputes 

Dear Ms. Chairwoman: 

The Agricultural Adjustment Act of 1938 and the Agricultural Marketing Act of 1946 entrust the 

Secretmy of Agriculture with representing the intetests of agricultural producers and shippers by 

working to improve transpo1tation services and facilities. One way the U.S. Department of 

Agriculture (USDA) accomplishes this mission is by taking a role in proceedings and issues 

before the Surface Transpo1tation Board (Board). 

On Friday, July 31, 2020, five of the seven Class I railroads submitted a Joint Petition for 

Rulemaking to establish an alternative voluntmy arbitration program for small rate disputes. 

USDA encourages the Board to establish a formal proceeding to further examine the proposal 

because an additional option for a new voluntmy arbitration program for small rate disputes 

could be useful. At the same time, USDA urges the Board to move forward expeditiously to 

finalize its Final Offer Rate Review (FORR) notice of proposed rulemaking and not allow the 

petition to interfere with or delay that effo1t. 

If appropriately structured, USDA supports mediation and arbitration as a means of resolving 

rate disputes. While it is encouraging, the proposal contained in the petition "has been shaped by 

productive discussions" with other stakeholders (p. 2), USDA believes the proposal can be made 

more effective with some modifications, which are discussed below. 

First and most impmtantly, the proposed arbitration process should not replace or delay the 

establishment of FORR. Voluntary arbitration works only when both parties have an incentive 

to pmticipate. Without an effective rate review mechanism to serve as a backstop, railroads have 

;no incentive to arbitrate over rates. USDA believes FORR is the driving force behind this 
The Honorable Ann D. Begeman 

Page 2 

petition, and we strongly encourage the Board to make a final ruling in the FORR proceeding 

before completing a rulemaking on the joint petition. This ruling will provide a necessary and 

clear backstop from which alternative dispute resolution mechanisms should be considered. 

Second, USDA believes an arbitration program should complement FORR, rather than be a 

substitute. Shippers and railroads should both be able to opt for arbitration, and ifthey both 

agree, then fmmal rate review proceedings might be precluded. That is, solutions reached 

through arbitration should be truly voluntaiy. As proposed, the petition appears one sided, in 

that if a railroad opts in, it would be a blanket exemption and preclude all its shippers from using 

FORR. According to the petition, if a railroad opt-in to the program, it would have the option to 

withdraw if "the STB adopts new rate reasonableness procedures in Ex Paiie 755 (FORR) 

without exempting cruriers paiiicipating in the Small Case Arbitration Program from those 

procedures" (p. 17). That is, railroads would essentially be choosing for shippers whether they 

have access to effective rate review through FORR or not. This is not truly voluntaiy. We 

encourage the Board to solicit stakeholder comments on ideas that would preserve choice for 

both the shippers and railroads. A properly structured, efficient, and affordable arbitration 

approach could well be a prefened alternative to FORR in many circumstances. 

Third, given railroads' desire to limit the types of cases that can be decided by arbitration-such 

as disputes concerning "the limit price test and a system-wide revenue adequacy 

constraint" (p. 27)- a fully accessible FORR and truly voluntary arbitration process are even 

more impmiant. With its focus on procedural rather than substantive limitations, FORR is cost 

effective while not limiting the kinds of cases shippers can bring. In an ai·bitration process, 

shippers and railroads should be able to make their best possible case, within the process 

constraints. If railroads insist on limiting the kinds of cases arbitrators can decide, then shippers 

must have the option of which process to use. 

Fomih, USDA strongly believes any Board rate review process should be as transparent as 

possible to encourage adoption of good business practices across the rail indust1y once cases are 

decided. Transparency is vital and indispensable in suppmiing a level playing field. Consistent 

and fair written decisions by arbitrators who know both the agricultural and rail industries are 

ensured only where there is public scrutiny and transparency that provide a means for all market 

paiiicipants to learn from case outcomes. USDA encourages transparency, so all stakeholders 

are allowed to learn from a few cases. This way, the shippers could see what happened in past 

cases involving circumstances similar to their own, which would aid them in preparing their own 

cases. It might even help them engage the railroads in private negotiations that enable them to 

achieve a satisfacto1y result without having to bring a case themselves and, thereby, move the 

entire industty toward best practices over time. 

USDA notes the railroads state that confidentiality of arbitration decisions is necessary because 

public decisions "could influence the marketplace and thus drive up the stakes for all litigants," 

including "railroads that may have similai·ly situated customers and ...shippers that often move 

traffic over more than one railroad" (p. 23). However, this statement is vague, unsuppmied by 

any data, and, therefore, highly speculative (at best) and USDA believes that it should not ca1ry 

any weight with the Boai·d. Given the vague and speculative basis for the railroads' cleat· 
The Honorable Ann D. Begeman 

Page 3 

support for confidentiality at the expense of transparency ("[arbitration] would be confidential to 

the maximum extent possible" (p. 16)), USDA believes the railroads' objection to transparency 

sterns from not wanting other shippers to obtain a better sense of how their own cases might be 

decided. The fact that transparency might "drive up the stakes" because railroads "may have 

similarly situated customers" (i.e., other customers with unreasonable rates) should be a reason 

for transparency, not a reason for secrecy (p. 23). 

Finally, in their joint petition, the petitioners say their consent to opt-in to the arbitration program 

would only last for a period of 5 years if the rest oftheir specific conditions are met. However, 

USDA believes in each complaint, both the railroad and shipper should have the oppmiunity to 

decide if the arbitration process is appropriate and workable for its interests. There also should 

be an oppmiunity for a holistic review by the Board and other stakeholders to ensure the process 

continues to work for all paiiies. In order to ensure the alternative arbitration program works 

fairly and effectively, USDA believes a clause should be included that allows for shippers and 

railroads to both provide feedback after a reasonable interval. An assessment could be done after 

its first year and then on an annual or biennial basis. 

Despite the concerns discussed above, USDA suppo1is a workable and fair arbitration process for 

rate review and thinks the petition off~red has promise, if appropriately modified. USDA has 

long advocated for fair and objective ai·bitration and mediation processes, and if such processes 

were bolstered by an effective fmmal rate review backstop like FORR, then a new voluntary, 

alternative arbitration system would be an excellent addition to the Board's rate review 

framework. 

The petitioners rightly "welcome discussions with other stakeholders" (p. 2). It is crucial that all 

interested paiiies weigh in. For these reasons, USDA would encourage and support the Board 

opening a proceeding for all to examine this petition in more detail. 

If you have any fmiher questions, please have a member of your staff contact the Office of 

Congressional Relations at (202) 720- 7095. 

A similar letter has been shared with your colleagues. 

Sincerely, 

Under Secretaiy 

Marketing and Regulatory Programs 
USDA

United States Department 

-

of Agriculture 

Office of the Secretary 

Washington D.C. 20250 

August 20, 2020 

The Honorable Martin J. Obe1man 

Vice Chair 

Surface Transp01tation Board 

395 E Street SW 

Washington, D.C. 20423 

RE: STB Ex Parte 765, Petition for Rulemaking to Establish an Alternate Voluntary 

Arbitration Program for Small Rate Disputes 

Dear Mr. Vice Chairman: 

The Agricultural Adjustment Act of 193 8 and the Agricultural Marketing Act of 1946 entrnst the 

Secretaiy of Agriculture with representing the interests of agricultural producers and shippers by 

working to improve transpo1tation services and facilities. One way the U.S. Depaitment of 

Agriculture (USDA) accomplishes this mission is by taking a role in proceedings and issues 

before the Surface Transpo1tation Board (Board). 

On Friday, July 31, 2020, five ofthe seven Class I railroads submitted a Joint Petition for 

Rulemaking to establish an alternative voluntary arbitration program for small rate disputes. 

USDA encourages the Boai·d to establish a fo1mal proceeding to fmther examine the proposal 

because an additional option for a new voluntaiy arbitration program for small rate disputes 

could be useful. At the same time, USDA urges the Board to move forward expeditiously to 

finalize its Final Offer Rate Review (FORR) notice of proposed rnlemaking and not allow the 

petition to interfere with or delay that effo1t. 

If appropriately structured, USDA supports mediation and arbitration as a means of resolving 

rate disputes. While it is encouraging, the proposal contained in the petition "has been shaped by 

productive discussions" with other stakeholders (p. 2), USDA believes the proposal can be made 

more effective with some modifications, which are discussed below. 

First and most imp01tantly, the proposed arbitration process should not replace or delay the 

establishment ofFORR. Voluntaiy arbitration works only when both paities have an incentive 

to participate. Without an effective rate review mechanism to serve as a backstop, railroads have 
The Honorable Martin J. Obe1man 

Page 2 

no incentive to arbitrate over rates. USDA believes FORR is the driving force behind this 

petition, and we strongly encourage the Board to make a final ruling in the FORR proceeding 

before completing a rulemaking on the joint petition. This ruling will provide a necessaiy and 

clear backstop from which alternative dispute resolution mechanisms should be considered. 

Second, USDA believes an arbitration program should complement FORR, rather than be a 

substitute. Shippers and railroads should both be able to opt for arbitration, and if they both 

agree, then f01mal rate review proceedings might be precluded. That is, solutions reached 

through arbitration should be truly voluntaiy. As proposed, the petition appeai·s one sided, in 

that if a railroad opts in, it would be a blanket exemption and preclude all its shippers from using 

FORR. According to the petition, if a railroad opt-in to the program, it would have the option to 

withdraw if "the STB adopts new rate reasonableness procedures in Ex Pa1te 755 (FORR) 

without exempting caniers participating in the Small Case Arbitration Program from those 

procedures" (p. 17). That is, railroads would essentially be choosing for shippers whether they 

have access fo effective rate review through FORR or not. This is not truly voluntaiy. We 

encourage the Board to solicit stakeholder comments on ideas that would preserve choice for 

both the shippers and railroads. A properly structured, efficient, and affordable arbitration 

approach could well be a prefened alternative to FORR in many circumstances. 

Third, given railroads' desire to limit the types of cases that can be decided by arbitration-such 

as disputes concerning "the limit price test and a system-wide revenue adequacy 

constraint" (p. 27)-a fully accessible FORR and truly voluntaiy arbitration process are even 

more important. With its focus on procedural rather than substantive limitations, FORR is cost 

effective while not limiting the kinds of cases shippers can bring. In an arbitration process, 

shippers and railroads should be able to make their best possible case, within the process 

constraints. If railroads. insist on limiting the kinds of cases arbitrators can decide, then shippers 

must have the option of which process to use. 

Fourth, USDA strongly believes any Board rate review process should be as transparent as 

possible to encourage adoption of good business practices across the rail indust1y once cases are 

decided. Transparency is vital and indispensable in supporting a level playing field. Consistent 

and fair written decisions by arbitrators who know .both the agricultural and rail industries are 

ensured only where there is public scrutiny and transparency that provide a means for all market 

paiticipants to learn from c·ase outcomes. USDA encourages transparency, so all stakeholders 

are allowed to learn from a few cases. This way, the shippers could see what happened in past 

cases involving circumstances similai· to their own, which would aid them in preparing their own 

cases. It might even help them engage the railroads in private negotiations that enable them to 

achieve a satisfactory result without having to bring a case themselves and, thereby, move the 

entire industly toward best practices over time. 

USDA notes the railroads state that confidentiality of arbitration decisions is necessaiy because 

public decisions "could influence the mai·ketplace and thus drive up the stakes for all litigants," 

including "railroads that may have similarly situated customers and ... shippers that often move 

traffic over more than one railroad" (p. 23). However, this statement is vague, unsupp01ted by 

any data, and, therefore, highly speculative (at best) and USDA believes that it should not cany 
The Honorable Maiiin J. Oberman 

Page 3 

any weight with the Board. Given the vague and speculative basis for the railroads' clear 

suppo1i for confidentiality at the expense oftransparency ("[~rbitration] would be confidential to 

the maximum extent possible" (p. 16)), USDA believes the railroads' objection to transparency 

sterns from not wanting other shippers to obtain a better sense of how their own cases might be 

decided. The fact that transparency might "drive up the stakes" because railroads "may have 

similarly situated customers" (i.e., other customers with unreasonable rates) should be a reason 

for transparency, not a reason for secrecy (p. 23). 

Finally, in their joint petition, the petitioners say their consent to opt-in to the arbitration program 

would only last for a period of 5 years ifthe rest oftheir specific conditions are met. However, 

USDA believes in each complaint, both the railroad and shipper should have the opp01iunity to 

decide if the arbitration process is appropriate and workable for its interests. There also should 

be an opp01iunity for a holistic review by the Board and other stakeholders to ensure the process 

continues to work for all paiiies. In order to ensure the alternative arbitration program works 

fairly and effectively, USDA believes a clause should be included that allows for shippers and 

railroads to both provide feedback after a reasonable interval. An assessment could be done after 

its first year and then on an annual or biennial basis. 

Despite the concerns discussed above, USDA supp01is a workable and fair arbitration process for 

rate review and thinks the petition offered has promise, if appropriately modified. USDA has 

long advocated for fair and obj~ctive arbitration and mediation processes, and if such processes 

were bolstered by an effective formal rate review backstop like FORR, then a new voluntary, 

alternative arbitration system would be an excellent addition to the Board's rate review 

framework. 

The petitioners rightly "welcome discussions with other stakeholders" (p. 2). It is crucial that all 

interested paiiies weigh in. For these reasons, USDA would encourage and support the Board 

opening a proceeding for all to examine this petition in more detail. 

If you have any fmiher questions, please have a member of your staff contact the Office of 

Congressional Relations at (202) 720-7095. 

A similar letter has been shared with your colleagues. 

Sincerely, 

Under Secretary 

Marketing and Regulatory Programs 
USDA 

United States Department 

-

of Agriculture 

Office of the Secretary 

Washington D.C. 20250 

August 20, 2020 

The Honorable Patrick J. Fuchs 

Board Member 

Surface Transportation Board 

395 E Street SW 

Washington, D.C. 20423 

RE: STB Ex Parte 765, Petition for Rulemaking to Establish an Alternate Voluntary 

Arbitration Program for Small Rate Disputes 

Dear Board Member Fuchs: 

The Agricultural Adjustment Act of 1938 and the Agricultural Marketing Act of 1946 entrust the 

Secretary of Agriculture with representing the interests of agricultural producers and shippers by 

working to improve transpo1iation services and facilities. One way the U.S. Depaiiment of 

Agriculture (USDA) accomplishes this mission is by taking a role in proceedings and issues 

before the Surface Transpo1iation Board (Board). 

On Friday, July 31, 2020, five ofthe seven Class I raihoads submitted a Joint Petition for 

Rulemaking to establish an alternative voluntaiy arbitration program for small rate disputes. 

USDA encourages the Board to establish a fo1mal proceeding to fmiher examine the proposal 

because an additional option for a new voluntaiy arbitration program for small rate disputes 

could be useful. At the same time, USDA urges the Board to move forward expeditiously to 

finalize its Final Offer Rate Review (FORR) notice of proposed rulemaking and not allow the 

petition to interfere with or delay that effort. 

If appropriately structured, USDA suppo1is mediation and arbitration as a means ofresolving 

rate disputes. While it is encouraging, the proposal contained in the petition "has been shaped by 

productive discussions" with other stakeholders (p. 2), USDA believes the proposal can be made 

more effective with some modifications, which are discussed below. 

First and most impmiantly, the proposed arbitration process should not replace or delay the 

establishment ofFORR. Voluntary arbitration works only when both paiiies have an incentive 

to paiiicipate. Without an effective rate review mechanism to serve as a backstop, railroads have 
The Honorable Patrick J. Fuchs 

Page2 

no incentive to arbitrate over rates. USDA believes FORR is the driving force behind this 

petition, and we strongly encourage the Board to make a final ruling in the FORR proceeding 

before completing a rulemaking on the joint petition. This ruling will provide a necessmy and 

clear backstop from which alternative dispute resolution mechanisms should be considered. 

Second, USDA believes an arbitration program should complement FORR, rather than be a 

substitute. Shippers and railroads should both be able to opt for arbitration, and if they both 

agree, then fo1mal rate review proceedings might be precluded. That is, solutions reached 

through arbitration should be truly volunta1y. As proposed, the petition appears one sided, in 

that if a railroad opts in, it would be a blanket exemption and preclude all its shippers from using 

FORR. According to the petition, if a railroad opt-in to the program, it would have the option to 

withdraw if "the STB adopts new rate reasonableness procedures in Ex Parte 755 (FORR) 

without exempting caniers pmiicipating in the Small Case Arbitration Program from those 

procedures" (p. 17). That is, railroads would essentially be choosing for shippers whether they 

have access to effective rate review through FORR or not. This is not truly voluntary. We 

encourage the Bom·d to solicit stakeholder comments on ideas that would preserve choice for 

both the shippers and railroads. A properly structured, efficient, and affordable arbitration 

approach could well be a prefened alternative to FORR in many circumstances. 

Third, given railroads' desire to limit the types of cases that can be decided by arbitration-such 

as disputes concerning "the limit price test and a system-wide revenue adequacy 

constraint" (p. 27)-a fully accessible FORR and truly voluntmy arbitration process are even 

more impmiant. With its focus on procedural rather than substantive limitations, FORR is cost 

effective while not limiting the kinds of cases shippers can bring. In ari arbitration process, 

shippers and railroads should be able to make their best possible case, within the process 

constraints. Ifrailroads insist on limiting the kinds of cases arbitrators can decide, then shippers 

must have the option of which process to use. 

Fomih, USDA strongly believes any Board rate review process should be as transpm·ent as 

possible to encourage adoption of good-business practices across the rail indust1y once cases are 

decided. Transparency is vital and indispensable in suppo1iing a level playing field. Consistent 

and fair written decisions by m·bitrators who know both the agricultural and rail industries are 

ensured only where there is public scrutiny and transparency that provide a means for all market 

pmiicipants to learn from case outcomes. USDA encourages transparency, so all stakeholders 

are allowed to learn from a few cases. This way, the shippers could see what happened in past 

cases involving circumstances similar to their own, which would aid them in preparing their own 

cases. It might even help them engage the railroads in private negotiations that enable them to 

achieve a satisfactory result without having to bring a case themselves and, thereby, move the 

entire industly toward best practices over time. 

USDA notes the railroads state that confidentiality of arbitration decisions is necessmy because 

public decisions "could influence the marketplace and thus drive up the stakes for all litigants," 

including "railroads that may have similarly situated customers and ...shippers that often move 

traffic over more than one railroad" (p. 23). However, this statement is vague, unsuppmied by 

any data, and, therefore, highly speculative (at best) and USDA believes that it should not carry 
The Honorable Patrick J. Fuchs 

Page 3 

any weight with the Board. Given the vague and speculative basis for the railroads' clear 

support for confidentiality at the expense of transparency ("[arbitration] would be confidential to 

the maximum extent possible" (p. 16)), USDA believes the railroads' objection to transparency 

stems from not wanting other shippers to obtain a better sense of how their own cases might be 

decided. The fact that transparency might "drive up the stakes" because railroads "may have 

similarly situated customers" (i.e., other customers with umeasonable rates) should be a reason 

for transparency, not a reason for secrecy (p. 23). 

Finally, in their joint petition, the petitioners say their consent to opt-in to the arbitration program 

would only last for a period of 5 years if the rest oftheir specific conditions are met. However, 

USDA believes in each complaint, both the railroad and shipper should have the opportunity to 

decide if the arbitration process is appropriate and workable for its interests. There also should 

be an oppmtunity for a holistic review by the Board and other stakeholders to ensure the process 

continues to work for all parties. In order to ensure the alternative arbitration program works 

fairly and effectively, USDA believes a clause should be included that allows for shippers and 

railroads to both provide feedback after a reasonable interval. An assessment could be done after 

its first year and then on an annual or biennial basis. 

Despite the concerns discussed above, USDA supports a workable and fair arbitration process for 

rate review and thinks the petition offered has promise, if appropriately modified. USDA has 

long advocated for fair and objective arbitration and mediation processes, and if such processes 

were bolstered by an effective formal rate review backstop like FORR, then a new voluntary, 

alternative arbitration system would be an excellent addition to the Board's rate review 

framework. 

The petitioners rightly "welcome discussions with other stakeholders" (p. 2). It is crucial that all 

interested pm.iies weigh in. For these reasons, USDA would encourage and suppmi the Board 

opening a proceeding for all to examine this petition in more detail. -

If you have any fmiher questions, please have a member of your staff contact the Office of 

Congressional Relations at (202) 720- 7095. 

A similar letter has been shared with your colleagues. 

Sincerely,