Dive Brief:

• A District Court in Alabama ruled Wednesday the state had not discriminated against CSX and other railroads by levying a 4% tax on dyed diesel fuel, Alabama.com reported last week. 
• The complaint was filed under the Railroad Revitalization and Regulatory Reform Act of 1976, and persisted for nine years as it appealed or applauded previous rulings. CSX contended that by charging it tax that did not apply to trucks or barges, it was subject to unfair practices within the state of Alabama.
• The 4% sales tax withheld by the railroad during the nine years of the suit amounts to roughly $10 million dollars, which will now go to fund the state's schools.

Dive Insight:

The CSX lawsuit is but an episode in an old battle between rail and freight for dominance of surface transportation.

While rail cannot deliver directly to manufacturer's doorstep, the long-haul trucking sector often relates its demand directly to the rate of rail transport. The choice often comes down to a comparison of price, speed and reliability of transport, but can vary by type, distance and value of commodity.  

As a result, any added cost on either truck or rail can inflate one mode's prices and benefit the other, skewing competitive forces. One problem: truckers, too, pay taxes railroads do not, like tolls or gas taxes. The specifics of the case are far more complicated, but serves as a reminder that modes are often in competition with each other. For global trade, air freight often booms when maritime transport faces a crisis.

Given this competition and volatility of rates, logistics providers often opt to offer a diverse transportation portfolio in order to mitigate intermodal risk.

In just one example, Inbound Logistics reports when the Ste. Michelle winery saw fuel prices rise, it sought to distribute by rail rather than truck. Looking for solutions, the winery turned to Railex, a rail distribution company that also offers other logistics services, to distribute 220 trucks-worth of products by rail while hiring trucks for the short-haul. In using more than one mode of transport, the winery was able to mitigate the effects of market volatility while meeting its logistics goals.