The American Chemistry Council (ACC) is expressing concern to the Surface Transportation Board about the Class Is’ liability requirements for shippers of hazardous materials.
In a Sept. 12 letter to the STB, ACC President Chris Jahn said the organization’s members are concerned about what he said are the Class Is’ efforts to shift liability for hazmat incidents to shippers.
“Most Class I railroads have imposed tariff provisions that include insurance and indemnity requirements for TIH [toxic inhalation hazard] shipments in addition to the very high rates those shippers already pay. In theory, rail shippers have an opportunity to negotiate different terms in their service contracts. However, many shippers, particularly those who are captive to a single railroad, are effectively forced to accept railroad requirements,” Jahn wrote.
The association is particularly concerned with Canadian Pacific Kansas City‘s “extensive indemnification and insurance requirements for TIH shipments,” Jahn’s letter states. Under the terms, the Class I accepts liability for its negligence or willful misconduct and “assigns the shipper liability for everything else, which includes third party liability and acts of God,” he added.
“TIH shippers must indemnify CPKC for those liabilities and procure at least $100 million of insurance to cover their indemnity obligations. CPKC imposes this cost upon TIH shippers above and beyond its exceedingly high transportation rates for TIH shipments,” wrote Jahn.
During the STB’s review of the merger between Canadian Pacific and Kansas City Southern, ACC and other rail shippers voiced concern that the merger would lead to an extension of CP’s TIH liability, indemnification and insurance requirements, which Jahn described as “the most onerous of the Class I railroads.” But the STB declined to adopt the ACC’s request that CP be prevented from imposing tariff terms on shipments on the pre-merger KCS network, according to Jahn.
“As a result, CPKC immediately imposed the terms across its combined network,” Jahn wrote. “CPKC indicated that it would reject shipments of TIH/PIH materials from customers who are not fully in compliance with the requirements, threatening to disrupt critical supply chains.”
ACC is concerned that other Class Is will follow CPKC’s practice, he added.
“Railroads seem poised to require shippers to obtain higher levels of insurance and to accept liability for more types of hazmat products beyond just TIH. Given the market power exerted by the Class I railroads, shippers have few options to resist these requirements,” wrote Jahn.
To read Jahn’s letter in its entirety, click here.