Notice2024-18030
Grupo México, S.A.B. de C.V. and GMéxico Transportes, S.A.B. de C.V.-Acquisition of Control Exemption-CG Railway, LLC
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Published
August 13, 2024
Issuing agencies
Surface Transportation Board
Full Text
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<title>Federal Register, Volume 89 Issue 156 (Tuesday, August 13, 2024)</title>
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[Federal Register Volume 89, Number 156 (Tuesday, August 13, 2024)]
[Notices]
[Pages 65965-65967]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-18030]
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SURFACE TRANSPORTATION BOARD
[Docket No. FD 36780]
Grupo M[eacute]xico, S.A.B. de C.V. and GM[eacute]xico
Transportes, S.A.B. de C.V.--Acquisition of Control Exemption--CG
Railway, LLC
On May 15, 2024, GM[eacute]xico Transportes, S.A.B. de C.V. (GMXT),
a noncarrier railroad holding company, filed a petition under 49 U.S.C.
10502 for exemption from the prior approval requirements of 49 U.S.C.
11323-24 to allow GMXT to acquire an indirect controlling ownership
interest in CG Railway, LLC (CGR), a Class III carrier.\1\ The Board
will grant the petition for exemption, subject to standard employee
protective conditions.
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\1\ The petition identifies GMXT as the entity seeking Board
authority to acquire a controlling ownership interest in CGR.
However, because Grupo M[eacute]xico, S.A.B. de C.V. (Grupo
M[eacute]xico) is the ultimate parent company of GMXT, this
proceeding has been recaptioned to include Grupo M[eacute]xico. GMXT
and Grupo M[eacute]xico are collectively referred to as Petitioners.
GMXT's initial petition, filed in Docket No. FD 36701, was
rejected as incomplete and for failing to provide adequate
supporting information. See GM[eacute]xico Transportes, S.A.B. de
C.V.--Acquis. of Control Exemption--CG Ry. (April 2024 Decision), FD
36701, slip op. at 2-4 (STB served Apr. 4, 2024). The Board also
required CGR and its owners to respond to questions concerning,
respectively, authorization for CGR's current operations and for the
transaction in which they acquired CGR. Id. at 4-5; see also infra
notes 3 & 4.
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Background
CGR is wholly owned by Golfo de M[eacute]xico Rail Ferry Holdings
LLC, a 50/50 joint venture (JV) between Seacor Holdings, Inc. (through
its wholly owned subsidiary, Rail Ferry Investment Holdings Inc.)
(Seacor) and Genesee & Wyoming, Inc. (through its wholly owned
subsidiary, G&W Agave Holdings Inc.) (GWI).\2\ (Pet. 2-3.) CGR provides
rail carrier service in the Port of Mobile, Ala., and rail ferry
service between the Port of Mobile and the Port of Coatzacoalcos,
Mexico, where the rail ferry operation connects to the Ferrosur
Railway, a rail carrier subsidiary of GMXT located in Mexico.\3\ (Pet.
3.)
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\2\ In response to questions raised in the April 2024 Decision
in Docket No. FD 36701, GWI and Seacor jointly submitted a letter
explaining that neither GWI nor Seacor ``controlled'' CGR within the
meaning of 49 U.S.C. 10102(7) and 11323(a) due to their 50/50
ownership split and provisions in the agreement governing the JV
requiring that decision-making authority is shared equally between
the parties. See Letter, May 7, 2024, GM[eacute]xico Transportes, FD
36701. In the absence of any countervailing evidence, the Board
finds this explanation satisfactory and supported by the agreement
governing the JV.
\3\ Following the April 2024 Decision in Docket No. FD 36701,
CGR obtained after-the-fact authority to operate the rail ferry
service between the Port of Mobile and the U.S. maritime boundary
line in the Gulf of Mexico. See CG Ry.--Operation Exemption--Rail
Ferry Serv., FD 36775 (STB served May 23, 2024). It had previously
sought and received authority to operate certain tracks within the
Port of Mobile, but not to operate the broader ferry service. Id. at
1-2.
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GMXT, a subsidiary of Grupo M[eacute]xico (a noncarrier holding
company), controls, through indirect ownership, Florida East Coast
Railway, L.L.C. (FECR), a Class II carrier in Florida, and Texas
Pacifico Transportation, Ltd. (Texas Pacifico), a Class III carrier in
Texas.\4\ (Pet. 3); see Grupo M[eacute]xico, S.A.B. de C.V.--Control
Exemption--Fla. E. Coast Holdings Corp., FD 36109, slip op. at 1 (STB
served May 9, 2017). As explained in the petition, FECR and Texas
Pacifico are in the same corporate family as the Copper Basin Railway,
Inc., a Class III carrier in Arizona that Grupo M[eacute]xico controls
through a different indirect subsidiary, ASARCO LLC. (Pet. 3-4).\5\
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\4\ As requested in the April 2024 Decision, charts showing the
intra-corporate relationships between and among the Grupo
M[eacute]xico companies before and after the proposed acquisition of
CGR are attached to the petition as Exhibit A. See April 2024
Decision, FD 36701, slip op. at 2-3 (requiring information about
corporate structure and holdings).
\5\ Grupo M[eacute]xico also obtained after-the-fact authority
to acquire Copper Basin in response to questions raised by the Board
in the April 2024 Decision in Docket No. FD 36701. See Grupo
M[eacute]xico, S.A.B. de C.V.--Acquis. of Control Exemption--Copper
Basin Ry., FD 36767 (STB served June 14, 2024).
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[[Page 65966]]
As described in the petition, GMXT has reached agreements with
Seacor and GWI under which GMXT would acquire an indirect 60% ownership
interest in the JV, ``which includes the railroad equipment and
trackage rights over 0.583 miles of line of railroad in the Port of
Mobile, Ala[.] known as tracks 14 and 15, and the rail ferry service
between the docks and the U.S. maritime territorial border.'' (Id. at
4.) \6\ Specifically, GMXT (through GMXT Marine LLC, an indirect wholly
owned subsidiary) will acquire all of Seacor's 50% ownership interest
in the JV, and 20% of GWI's 50% ownership interest, resulting in GMXT
having an indirect 60% ownership interest in the JV and control of the
JV and CGR. (Pet. 4.) GMXT states that Seabulk Fleet Management LLC, an
affiliate of Seacor, will remain as ferry operator on a contract basis
with CGR. (Id.)
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\6\ Copies of the agreements are attached to the petition as
Exhibit C. On July 3, 2024, GMXT filed an amendment to the agreement
with Seacor modifying certain dates specified in the agreement. GMXT
states that the amendment was filed for completeness and affects no
substantive provision of the agreement. (GMXT Suppl. 3.)
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In support of its petition, GMXT states that CGR will continue to
operate in the same manner as it currently does. (Id. at 6.) GMXT notes
that concentrating ownership of CGR in GMXT, a frequent user of the
rail ferry service, will ensure that revenue from the service is used
for railroad purposes and provide GMXT with both greater incentive and
ability to invest in the rail ferry and improve operations. (Id.) GMXT
asserts that granting the exemption will promote several goals of the
rail transportation policy (RTP) of 49 U.S.C. 10101. (Id. at 6-7
(listing provisions).) GMXT further contends that the grant of an
exemption will not adversely affect any of the remaining elements of
the RTP. (Id. at 7.) Finally, GMXT asserts that the transaction is
limited in scope and that application of the requirements of sections
11323-24 is not necessary to protect shippers from the abuse of market
power, and it explains the reasons for this contention. (Id. at 7-11.)
Discussion and Conclusions
The acquisition of control of a rail carrier by a person that is
not a rail carrier but that controls any number of rail carriers
requires prior approval from the Board under 49 U.S.C. 11323(a)(5).
Under section 10502(a), however, the Board shall, to the maximum extent
consistent with 49 U.S.C. subtitle IV, part A, exempt a transaction or
service from regulation when it finds that: (1) regulation is not
necessary to carry out the RTP of 49 U.S.C. 10101; and (2) either (a)
the transaction or service is limited in scope, or (b) regulation is
not needed to protect shippers from the abuse of market power.
In this case, an exemption from the prior approval requirements of
49 U.S.C. 11323-24 is consistent with the standards of 49 U.S.C. 10502.
Detailed scrutiny of the proposed transaction through an application
for review and approval under sections 11323-24 is not necessary here
to carry out the RTP. Under these circumstances, and given GMXT's
representations, approval of the transaction would result in a change
in ownership and control of CGR with no lessening of competition. GMXT
asserts that concentrating ownership of CGR in GMXT, a frequent user of
the rail ferry service, will ensure that revenue from the service is
used for railroad purposes and provide GMXT with greater incentive and
ability to invest in the rail ferry and to improve operations. (Pet.
6.) Therefore, an exemption would further the RTP by promoting a safe
and efficient rail transportation system, 49 U.S.C. 10101(3); ensuring
the development and continuation of a sound rail transportation system
to meet the needs of the public, 49 U.S.C. 10101(4); fostering sound
economic conditions in transportation, 49 U.S.C. 10101(5); and
encouraging efficient management of railroads, 49 U.S.C. 10101(9). An
exemption would also promote the RTP by minimizing the need for federal
regulatory control over the transaction, 49 U.S.C. 10101(2); reducing
regulatory barriers to entry, 49 U.S.C. 10101(7); and providing for the
expeditious resolution of this proceeding, 49 U.S.C. 10101(15). Other
aspects of the RTP would not be adversely affected.
Nor is detailed scrutiny of the proposed transaction necessary to
protect shippers from an abuse of market power.\7\ As noted in the
petition, the market for the transportation of goods between the U.S.
and Mexico is robust; shippers have many transportation choices, and
CGR's rail ferry service is a small component of that dynamic market.
(Pet. 8.) Moreover, the transaction does not prevent other rail
carriers--or any entity except Seacor and its affiliates (for a period
of five years) \8\--from entering the market to compete with CGR by
offering rail ferry service between Mobile and Coatzacoalcos or between
other port locations on the Gulf of Mexico in either country. (Id. at
8-10.) GMXT states that no shippers would experience a reduction of
competitive options. (Id. at 8.) \9\ GMXT also explains that CGR must
interchange traffic moving into and out of its two tracks at the Port
of Mobile; that the transaction agreements do not limit its ability to
interchange with any of several third-party connecting carriers; and
that the proposed transaction involves the common control of carriers
that have only one direct connection and do not compete with each
other.\10\ GMXT further represents ``that it will not use the
connection between CGR and Ferrosur to foreclose vertical competition
over efficient joint line routes with unaffiliated carriers,'' (Pet. 9
n.9), and the Board will hold GMXT to that statement.\11\ See Genesee &
Wyo.--
[[Page 65967]]
Acquis. of Control Exemption--Atl. W. Transp. & Heart of Ga. R.R., FD
36105, slip op. at 3 (STB served Apr. 18, 2017) (holding carrier to
similar representation in exemption proceeding). Moreover, no shipper
(or any other entity) has objected to this control transaction. Based
on the record, the Board finds that the transaction does not shift or
consolidate market power and that regulation is not needed to protect
shippers from an abuse of market power.
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\7\ Given this finding, the Board need not determine whether the
transaction is limited in scope. See 49 U.S.C. 10502(a).
\8\ In response to questions raised in the April 2024 Decision
in Docket No. FD 36701 regarding the competitive impact of a non-
compete provision in the GMXT-Seacor agreement, the petition
explains that the provision restricts Seacor and its affiliates from
providing or supporting a competing rail ferry service for five
years between U.S. and Mexican ports in the designated area in which
CGR will provide service. (Pet. 10.) It emphasizes that other
companies can provide rail ferry service in CGR's territory, and
that any company, including Seacor, can ship freight between the
U.S. and Mexico by land. (Id.) The petition further contends that
such a provision is necessary to protect GMXT's investment in CGR,
including acquisition of CGR's goodwill and relationship with
customers, which may be imperiled if Seacor commences new rail ferry
operations that replicate CGR's current service. (Id.) After a
review of the contractual provision, and based on the information
submitted in the petition, the Board finds that the clause will not
have an anticompetitive effect, on balance, in the market in which
CGR operates.
\9\ (See also id. at 8 (stating that ``shippers will have the
same service options available to them as they have now''; that
``[n]o shipper will lose an existing transportation option''; and
that ``CGR will continue to provide common carrier rail service'').)
\10\ GMXT's assertion that the Board ``has consistently rejected
the notion that new single-line movements created through merger
would lead the merged carrier to vertically foreclose competition
over efficient routes by refusing to cooperate with unaffiliated
carriers,'' (Pet. 8-9 (quoting a 2007 decision in a control
proceeding)), is mistaken. See Canadian Pac. Ry.--Control--Kan. City
S., FD 36500, slip op. at 44-47 (STB served Mar. 15, 2023)
(concluding that the one-lump theory does not justify a presumption
that a vertical combination will not result in competitive harm).
\11\ GMXT states that it does not concede that competitive
effects of interchange in Mexico fall within the Board's
jurisdiction but makes this representation in the event the Board
concludes otherwise. (Pet. 9 n.9.) The Board has jurisdiction over
transportation in the United States between a place in the United
States and a place in a foreign country. See 49 U.S.C.
10501(a)(2)(F); see also, e.g., Can. Packers, Ltd. v. Atchison,
Topeka & Santa Fe Ry., 385 U.S. 182 (1966) (upholding ICC's
determination that it had jurisdiction to determine the
reasonableness of a joint through international freight rate from
New Mexico to Canada and to order reparations, including for the
overcharge on the Canadian portion of the trip); Canadian Pac. Ry.--
Control, FD 36500, slip op. at 54 & n.77 (Board may consider U.S.-
related impacts of potential rate manipulation or other post-
transaction conduct that adversely affects interline optionality at
international gateway and, if warranted, remedy the situation).
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Under 49 U.S.C. 10502(g), the Board may not use its exemption
authority to relieve a carrier of its statutory obligation to protect
the interests of employees. Accordingly, as a condition to granting
this exemption, the Board will impose the standard employee protective
conditions in New York Dock Railway--Control--Brooklyn Eastern District
Terminal, 360 I.C.C 60, aff'd New York Dock Railway v. United States,
609 F.2d 83 (2d Cir. 1979).
The control transaction is exempt from environmental reporting
requirements under 49 CFR 1105.6(c)(1)(i) because it will not result in
any significant change in carrier operations. Similarly, the
transaction is exempt from the historic reporting requirements under 49
CFR 1105.8(b)(1) because GMXT states that it has no plans to dispose of
or alter properties subject to the Board's jurisdiction that are 50
years old or older.
In its July 3, 2024 filing, GMXT asks that the exemption be made
effective no later than August 27, 2024. (GMXT Suppl. 4.) GMXT's
rationale is not persuasive, particularly given the questions raised in
the April 2024 Decision in Docket No. FD 36701 and the complexities of
this proceeding, which counsel in favor of giving interested parties
time to review this decision prior to the exemption's effective
date.\12\ The Board will retain the 30-day period prescribed by 49 CFR
1121.4(e). The exemption will be effective September 12, 2024.
Petitions to stay must be filed by August 23, 2024. Petitions for
reconsideration or petitions to reopen must be filed by September 3,
2024.
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\12\ GMXT requests expedited consideration ``to allow the
parties to complete all necessary actions required to accomplish the
postponed closing [of the agreement with Seacor] without any further
delay.'' (GMXT Suppl. 4; see id. at 3 (stating that closing was
postponed ``to align with [the agreement between GMXT and GWI],
which includes a similar date'').) Petitioners' desire to meet their
chosen closing date(s) is not, by itself, a sufficient basis for
shortening the 30-day period (and, potentially, the related interim
deadlines for stay, reconsideration, and reopening requests)
identified in 49 CFR 1121.4(e) before an exemption may take effect,
particularly given the circumstances of this proceeding.
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It is ordered:
1. Under 49 U.S.C. 10502, the Board exempts from the prior approval
requirements of 49 U.S.C. 11323-25 the control transaction described
above, subject to the employee protective conditions in New York Dock
Railway--Control--Brooklyn Eastern District Terminal, 360 I.C.C 60,
aff'd New York Dock Railway v. United States, 609 F.2d 83 (2d Cir.
1979).
2. Petitioners must adhere to GMXT's statement that it will not use
the connection between CGR and Ferrosur to foreclose vertical
competition over efficient joint line routes with unaffiliated
carriers.
3. Notice of the exemption will be published in the Federal
Register.
4. The exemption will become effective on September 12, 2024.
Petitions for stay must be filed by August 23, 2024. Petitions for
reconsideration or petitions to reopen must be filed by September 3,
2024.
Decided: August 8, 2024.
By the Board, Board Members Fuchs, Hedlund, Primus, and Schultz.
Kenyatta Clay,
Clearance Clerk.
[FR Doc. 2024-18030 Filed 8-12-24; 8:45 am]
BILLING CODE 4915-01-P
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</html>Indexed from Federal Register on August 13, 2024.
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