Source: The Loadstar
Date: 13th September 2023
The US Surface Transportation Board (STB) has released a Notice of Proposed Rulemaking (NRPM) that looks to give rail users access to reciprocal switching in an effort to cope with poor carrier performance.
It called this “an important step in addressing the many freight rail service concerns expressed by stakeholders since 2016”.
Following repeated complaints from cargo owners about service problems and delays by rail carriers, the STB began extensive hearings on rail service problems in April 2022 and has repeatedly criticised the railways for ongoing service failures.
“Since joining the STB nearly five years ago, it has become apparent to me that many of the ills of the national freight rail network stem from a lack of competition in the industry and the fact that many rail customers are captive to one Class I railroad,” remarked STB chairman at the presentation of the proposed rules.
“The board has determined to focus its efforts with respect to reciprocal switching on providing relief to rail customers suffering from poor service. With the issuance of today’s NPRM, the board is proposing that one approach to improving rail service is to afford affected shippers the opportunity to obtain a reciprocal switch to a competing Class I carrier when service falls below a standard set in the proposed rule,” STB said.
According to the STB, the proposed rules set “specific, objective and measurable criteria when reciprocal switching is warranted”, which would give shippers predictability and show carriers what is expected of them.
The first is service reliability, measured in how successful a carrier is in delivering a shipment by the original estimated time of arrival given to the shipper. The ETA would be based on all shipments moved in that traffic lane over 12 consecutive weeks. The STB proposes that carriers would have to deliver at least 60% of shipments within 24 hours of the ETA in the first year, raising the bar to 70% the following year. This would give carriers time to adjust personnel and resources to meet required standards.
The second criterion measures carrier service consistency in maintaining efficiency in moving a shipment through their systems, based on transit time. Shippers would be eligible for reciprocal switching if a carrier’s average transit time increased by a proposed margin of 20% or 25% vis-a-vis the same 12-week period in the previous year.
The third criterion covers carrier performance in local deliveries and pick-ups of loaded and unloaded railcars. The NPRM proposes a success rate of below 80% over a period of 12 consecutive weeks as the threshold for reciprocal switching.
“Each of the four [Class I] carriers required to submit service recovery plans has acknowledged that their service fell short of public expectations or needs during the time when the carriers reported their initial performance levels,” the STB noted.
Under the NPRM, Class I carriers would be required to provide the applicable historical data for service metrics to customers within seven days of request. To the STB they would have to report on a weekly basis the percentage of shipments delivered to their destination within 24 hours of the estimated arrival time and the percentage of planned service windows in which they successfully performed the requested local service.
“Importantly, for the first time, the proposed rule would also require all three service metrics to be standardised across all Class I carriers,” the STB noted. It added that it intends to make certain data reporting requirements pertaining to service reliability permanent.
Reciprocal switching agreements would be for a minimum of two years and up to a maximum of four years, according to the NPRM.
Stakeholders have until 23 October to submit their comments.
The Association of American Railroads has welcomed the initiative but did not offer any comment, other than it would examine the proposed rules.
Some observers find the performance thresholds rather lenient on carriers. On the other hand, current rules place the burden on the cargo owner to prove anti-competitive behaviour by a rail carrier.