CERTIFICATE OF SERVICE

I, Bruce Blanton, certify that on this 17th day of May, 2012, I caused a copy of the

foregoing document to be served by first-class mail, postage prepaid, on all parties of

Fo Ebb

Bruce Blanton

Director

Transportation Services Division
U.S. Department of Agriculture
Washington, D.C. 20250

record in STB Docket Number EP 699.


All three of the points concerning arbitration address the same issue — building trust that
the system will deliver an impartial decision. USDA believes that implementing these
points will go a long way to foster individual parties’ trust in the arbitration process,
leading to an increase in arbitration as an effective method of settling differences.
Nevertheless, in certain industries, such as agriculture, that already are served by an
effective arbitration process, a party should continue to have the option of using that
process in addition to any new process created by the Board.

Respectfully submitted,

Edward Avalos

Under Secretary

Marketing and Regulatory Programs
U.S. Department of Agriculture
Washington, D.C, 20250



Date: May 17, 2012

Before the U.S. Surface Transportation Board

STB Ex Parte No. 699

Assessment of Mediation and Arbitration Procedures

Comments of the

U.S. Department of Agriculture

Edward Avalos

Under Secretary

Marketing and Regulatory Programs
U.S. Department of Agriculture
Washington, D.C. 20250



Authority and Interest

The Secretary of Agriculture is charged with the responsibility under the Agricultural
Adjustment Act of 1938 and the Agricultural Marketing Act of 1946 to represent the
interests of agricultural producers and shippers in improving transportation services and
facilities by, among other things, initiating and participating in Surface Transportation
Board (Board) proceedings involving rates, charges, tariffs, practices, and services.

The ability to appeal rail rates and practices is important to agricultural shippers and
producers. Agricultural producers typically receive a price for their products which is net
of transportation and many are dependent upon rail transportation to move those products
to international and domestic markets.

Comments

The Department of Agriculture (USDA) supports the Board’s consideration of mediation
and voluntary arbitration as potential lower cost alternatives for carriers and shippers to
resolve disputes in a more amicable fashion than through more formal processes. A
tangible benefit of a mediation or arbitration process which is perceived as fair by both
parties is the likely preservation of business relationships. To this end, USDA applauds
the Board for undertaking this proceeding.

From either a shipper’s or carrier’s perspective, whether bias actually exists within the
system is irrelevant so long as it is believed to exist. Thus, if parties are to make use of
the arbitration system, there must be assurances of fairness, neutrality, and openness to
foster an atmosphere of trust. Creating a transparent arbitration process would signal
such assurances.

Arbitration

USDA understands the potential benefits and the Board’s desire to encourage greater use
of its arbitration system. Agricultural shippers have a long-established, neutral, and
successful arbitration system available for use in rail disputes. For those industries
having an established arbitration system in place, USDA requests that the Board
proactively preserve the shipper’s option to have the dispute arbitrated in either venue.
Without the Board’s recognition and protection of existing arbitration systems, the
proceeding could have the unintended result of diminishing or even discontinuing the use
of a venue that agricultural shippers believe provides a fair and impartial resolution of
certain rail disputes.

The proposed changes to the Board’s arbitration rules are true to the spirit of providing
value to both carriers and shippers through voluntary participation and simplification of
the process. USDA also agrees with the Board that arbitration should be limited to
matters “possessing monetary value but lacking policy significance.” This will largely
avoid the concern of keeping arbitration decisions consistent with past Board decisions.
However, there are three characteristics of the proposed changes that do not provide
maximum value to parties and may ultimately preclude greater use of the Board’s
arbitration process.



First, while the Board has proposed a single arbitrator because of its limited resources, it
has asked for comments on approaches it could employ should parties opt for a panel of
arbitrators. By allowing for a panel at the request of either party, parties would be more
likely to accept arbitration as a viable solution.’ If the panel option is chosen, then having
each party pay for one additional arbitrator would seem to be the most acceptable method
to cover the additional costs. All arbitrators should be knowledgeable of the industries
they represent instead of coming from legal or political backgrounds. In addition, it is
important that all parties believe in the neutrality of the arbitrators maintained by the
Board and the method in which they are chosen for individual cases. One method would
be to have the Board choose arbitrators from a neutral source and let shippers and carriers
have the option of each choosing an additional arbitrator.

Second, transparency in the arbitration process, accomplished by publishing the decisions
that exclude proprietary information, would best serve the ideal of neutrality. If policy
matters were arbitrated and able to affect precedent, then a confidential process may be
necessary. However, given that the proposed arbitration is limited to non-policy matters
and would set no precedents, an arbitration system that is transparent to the public would
be in the best interest of demonstrating a commitment to neutrality. Such transparency
could also have potential value in fostering an environment for improved business
relationships among all players in the involved industries, and perhaps in informally
communicating how changes in business practices were addressed in individual
situations. In the short-run, interested parties would be less hesitant to use a system if
they are able to review other arbitration decisions. Over the long-run, a system that is
transparent will build trust in individual arbitrators as well as the entire process.

Third, the Board should consider including an appeals process for instances not involving
a clear abuse of an arbitrator’s authority or discretion. There are circumstances under
which either party may wish to appeal an arbitrated decision, Without an effective
avenue for appeal, the arbitration process may be avoided. One option for an appeals
process would be to have a separate panel composed of more experienced arbitrators that
only arbitrate appeals. This approach would make arbitration more desirable to parties
while freeing the Board from becoming involved.

Arbitration Relief

The Board has invited comments concerning the $200,000 cap on relief awarded through
the arbitration process. The main concern with any arbitrary cap is that if set too low
arbitration becomes an impracticable solution for seeking redress. Shipper groups have
commented to USDA that rail related damages involving disputes subject to arbitration
often exceed $200,000. Therefore, the Board must choose a cap, if any, that reflects the
true costs for which a party would seek remuneration in order to make the arbitration
process practicable to the widest number of potential users.

Conclusion