Posts Tagged ‘railroad shippers’

STB Seeks Comment on ‘First Mile, Last Mile’

September 23, 2021

The U.S. Surface Transportation Board is seeking comment on how well railroads perform first mile and last mile service to shippers.

STB defines this as “the movement of railcars between a local railroad serving yard and a shipper or receiver facility.”

In its call for comments, regulators said they want to hear about what concerns shippers, carriers and public have about first mile, last mile service.

In announcing the call for comments, the STB said comment is also being solicited about whether further Board review of first mile, last mile service is warranted and what actions might need to be taken.

The STB said it was particularly interested in knowing whether metrics to measure first mile, last mile service that are not now being reported to the Board might have utility for the supply chain, and the potential burdens associated with any such reporting.

The STB noted that it has received comments from various shipper groups within the past year expressing concern about first mile, last mile service and requesting “greater transparency of FMLM data.”

Shippers have said that railroad crew shortages and other issues stemming from the COVID-19 pandemic and worldwide supply chain complications have heightened the importance of the Board exploring first mile, last mile service.

Comments are being accepted between Oct. 18 and Nov. 16. Replies to those comments will be accepted from Dec. 17, 2021, to Feb. 17, 2022.

Shipper Coalition Seeks Reciprocal Switching

July 31, 2021

A coalition of railroad shippers is seeking new federal rules that would allow reciprocal switching.

The group, known as the Rail Consumer Coalition, made their plea in a letter to the U.S. Surface Transportation Board.

Shippers n the coalition account for more than half of U.S. freight traffic and claim to generate three-quarters of the revenue earned by Class 1 railroads.

They include firms in the manufacturing, agricultural, and energy sectors and include trade associations for the automakers, chemical producers, forest product and paper manufacturers, as well as rail shipper groups such as the National Industrial Transportation League.

In their letter to the STB, the coalition said rail freight rates adjusted for inflation have risen 43 percent since 2004 because of railroad industry consolidation.

“Given the dramatic concentration of market power in the railroad industry, rethinking policies designed for a different era is both timely and smart,” the coalition wrote to federal regulators.

“Reciprocal switching would help empower rail customers such as farmers, manufacturers and energy providers to choose a carrier that provides the best combination of rates and service.”

The letter went on to say greater market choice would change shipper-railroad relationships and lead to resolutions of rate and service issues.

Reciprocal switching would allow a facility served by one railroad to seek service from a second railroad via interchange.

It has long been a goal of carload rail shippers. The STB launched a reciprocal switching investigation in 2016, but it has yet to lead to any action by regulators.

The Association of American Railroads opposes reciprocal switching, which it has labeled forced access.

“Any STB action mandating forced switching would put railroads at a severe disadvantage to freight transportation providers that depend upon tax-payer funded infrastructure,” AAR CEO Ian Jefferies said. “Such a rule would degrade rail’s significant benefits to both customers and the public by throttling network fluidity, disincentivizing investment, increasing costs to shippers and consumers, and ultimately diverting traffic onto trucks and the nation’s already troubled highways.”

AAR officials have described freight rates as fair market rates.

STB Chairman Martin J. Oberman in recently remarks has expressed an interest in taking up reciprocal switching and others measures that might increase competition among railroads.

Shippers Want Local Service Metrics Reported

September 3, 2020

Railroad shippers are asking the U.S. Surface Transportation Board to require Class I carriers to begin reporting local service metrics.

The STB currently required weekly performance reports from the carriers on such things as terminal dwell, average train speed, and number of trains held.

But the coalition of shippers said this data does not provide information about local service to and from a customer’s spur or facility.

“Many of our members have become increasingly aware of and concerned by the gap between the service data that the railroads report to [the] Board and the level of service that shippers actually receive in the real world,” the shippers said in a letter to the Board.

The coalition said the omission of first-mile/last-mile data is a significant and growing concern and without it shippers and regulators lack relevant information as to how railroads are actually performing and whether they are providing service that comports with common carrier obligations.

The coalition includes the National Industrial Transportation League, Freight Rail Customer Alliance, National Coal Transportation Association, and the Private Railcar Food and Beverage Association.

In its letter to the STB, the coalition said its members have experienced rail service problems and railroads have not moved quickly enough to restore local service to pre-COVID-19 pandemic levels.

Crew shortages have contributed to missed local switches and excessively late or annulled trains.

The trend of Class 1 railroads to move some single commodity traffic as part of general merchandise trains has further limited data on rail service performance, the shipper groups said.

In a related comment, the coalition was critical of how railroads are relying even more on longer trains as they seek to reduce their costs during the pandemic.

BNSF is the only Class I railroad to publicly report local service performance.

CSX and Union Pacific report trip-plan compliance figures for their intermodal and merchandise networks every quarter.

The call from the shipper’s coalition drew a sharp rebuke from the Association of American Railroads, which said forcing carrier to report local service data would create new regulatory burdens.

“Railroads already report extensive service data to the STB on a weekly basis,” AAR said in a statement. “It is unclear what additional metrics are being suggested, whether data relevant to such metrics exists and would provide reliable and meaningful information, what burdens additional data reporting and analysis would place on both the railroads and the regulator, and how any additional service reporting requirements would relate to the limited regulatory authority that Congress has given to the STB.”

Panel Discusses Pros, Cons of PSR

August 20, 2020

The precision scheduled railroad operating model might seem to be the same at all railroads that use it, but panelists said during the Midwest Virtual Rail Conference that there are differences from railroad to railroad in how the model is practiced and the consequences for shippers.

Panelists said some shippers have benefited greatly by the use of PSR by Class 1 railroads, but others have suffered.

In some instances it is not the model itself that caused that but the lack of adequate personnel that railroads have to support their operations.

That latter point was emphasized by Dan Sabin, president of short line Iowa Northern.

His the 253-mile railroad interchanges with three Class 1s practicing PSR, Canadian National, Canadian Pacific and Union Pacific.

When the late E. Hunter Harrison implemented PSR at CN and CP, a byproduct was staff cuts that resulted in the loss of institutional knowledge by experienced local operating personnel.

Those positions were either eliminated or replaced with inexperienced people who have proven difficult to work with.

Sabin said CP has a responsible marketing team, but its interchange service is unreliable. As a result, some of his customers refuse to route freight via CP.

CN personnel, Sabin said, have a condescending attitude that reflects a lack of understanding of the benefits of traffic growth that can come from working closely with short line railroads.

Of the three Class 1s that Iowa Northern works with, Sabin said Union Pacific is the best.

He said UP kept experienced local operating people in place while reducing bureaucracy at its headquarters.

It has focused on Iowa Northern’s role of providing first- and last-mile service, has communicated well, has assigned a liaison who can get through any department at headquarters within a day, and has been open to suggestions Iowa Northern has made.

“They adopted a lot of their operations to fit what our customers needed and showed an incredible amount of appreciation for what we are doing with them. They are making changes quickly to identify and rectify service issues,” Sabin said.

Tyler Dick, a lecturer and principal research engineer at the Railtec program at the University of Illinois at Urbana-Champaign, said Harrison sought to combine elements of two opposing strategies in railroading.

One approach, known as hold-for-tonnage, is to hold onto freight cars in yards until enough of them have accumulated to operate one train.

The other approach, known a schedule adherence, seeks to use shorter trains to provide more frequent service with shorter transit times.

In Harrison’s vision, PSR sought to provide consistent, frequent service to reduce terminal dwell and transit time but doing so with long trains and reduced rolling stock requirements to minimize costs.

Hence PSR practitioners seek to operate general-purpose trains instead of dedicated single-commodity trains.

PSR also has changed the way local service is provided. Rather than use multiple crews on the same shift, railroads are using one crew per shift that shares motive power.

This might be a more efficient use of assets but it comes at the cost of service flexibility.

Dick said PSR also did away with the practice of locals gathering traffic, taking it to a yard and then sending it to a hump yard for classification into blocks organized by destination.

Under PSR, there is more emphasis on pre-blocking outbound traffic at origin or local yards.

That has meant less need for sorting with hump yards, which in turn can be converted to flat-switching in order to reduce costs.

In short, Dick said PSR simplified traffic flows and switching requirements while maximizing train size and minimizing dwell time.

Yet he said PSR is not one thing but a collection of actions that change operating practices and culture.

Peter Swan, an associate professor of logistics and operations management at Penn State Harrisburg, said PSR has resulted in more efficient railroads that use less equipment and have reduced the variability in transit times by reducing the use of hump yards.

That has benefited some shippers and been useful to the railroads during the COVID-19 pandemic-related changes in freight traffic.

On the other hand, Swan said, other shippers are in worse condition because they’ve seen their transit times get longer and they now need a larger car fleet to compensate for that.

That has particularly been the case, he said, with freight originating on light-density lines that have seen reduced service frequency.

Swan cited the case of an unidentified short line that used to receive 50 cars three times a week from a Class 1 connection. Now it receives 150 cars once a week.

He noted that short lines fortunate enough to have their interchange located in close proximity to a busy Class 1 terminal might see five day a week interchange on a reliable schedule.

PSR has also resulted in Class 1 railroads forcing demurrage and accessorial charges onto shippers. Railroads used to bear those costs.

“Normally in a service business you try to provide some service the customer wants,” Swan said.

“Under PSR the railroads provide a service and the customers can take it or leave it to a large extent.”

Shippers Expect Higher Freight Rates in Near Term

July 15, 2020

Railroad shippers expect to pay 2.3 percent above rail cost inflation over the next six months to a year a survey has found.

The survey, conducted by the investment banking firm Cowen, found shippers expect their business to grow 1.2 percent during the period, which is the second-lowest response on record since Cowen began the quarterly surveys in 2016.

The percentage of shippers expecting their employee headcounts to increase over the next 12 months increased from last quarter’s response but is well under the 39 percent average answer.

Forty-three percent of shippers said they are more confident in the direction of the economy today than they were three months ago.

The survey found that 59 percent of respondents do not expect a full “return to normal” until next year.

Asked to rate the service they receive from Class 1 railroads, 55 percent of shippers said it was “positive.” That is a decline from 61 percent in the first quarter of 2020.

Rail Shippers Not Optimistic for Short Term

April 14, 2020

A survey of railroad shippers found the number expected rail car orders is falling and business growth has come to a near halt.

The survey was conducted by Cowen and Company and the results published on the website of Railway Age.

The survey found mixed results when shippers were asked to estimate how many rail car they would order.

Although most respondents expect to order fewer cars, the percentage that plan to order more than 2,000 units increased to 10 percent from 3 percent in the fourth quarter.

That could reflect a small number of shippers taking advantage of possible price decreases during an economic downturn.

Shippers expect railroad freight rates to increase by 1.9 percent over the next six to 12 months.

Some shippers, though, expect railroads to cut pricing in the face of volume declines and the effects of the COVID-19 pandemic.

When asked if they believe there will be an economic recession in the next six months, 78 percent of respondents answered in the affirmative.

Shippers expect their businesses to barely expand during the next 12 months.

Just 10 percent of shippers are more confident in the economy now than they were three months ago when 54 percent expressed growing confidence in the economy.

The pandemic has affected 85 percent of those who responded and Cowen said had the survey been conducted a few days later the response like would have been higher.

The percentage of respondents that expect a return to normal in April was 1 percent while 10 percent think it will be May.

More likely, shippers believe a return to normal won’t happen until August or later.

STB Turns Away Bid to Invalidate Fuel Surcharges

January 4, 2020

A bid by a coalition of rail shipper to invalidate what they described as unfair fuel surcharges has been turned aside by the U.S. Surface Transportation Board.

The agency this week denied the coalition’s petition for reconsideration of its earlier decision to close a case against fuel surcharges brought by a shipper.

The agency had earlier ruled “that any fuel surcharge program applied to regulated traffic must be based on attributes of a movement (such as mileage) that directly affect the amount of fuel consumed.”

The STB created what it termed a “safe harbor” index based on the Highway Diesel Fuel Index that railroads could use to create fuel surcharges.

In creating the index, the STB said the index has been the subject of extensive “notice and comment scrutiny” and therefore it would no longer be subject to challenges from shippers.

However, shippers continue to argue that the fuel surcharges are exorbitant fees and in some instances railroads have sought to recover amounts “over and above” their actual increased fuel costs.

Railroads have contended that the fuel surcharges are a means to recoup their fuel costs.

The STB had ruled in 2006 that if a fuel surcharge was used as “a broader revenue enhancement measure, it is mislabeled” and it prohibited surcharges created from the percentage of a base shipping rate.

In its ruling this week, the STB said a shipper’s petition for reconsideration “rested on various claims of material error.”

The shippers had wanted the agency to reconsider an earlier decision to discontinue a proceeding due to lack of substantial feedback from stakeholders.

The STB’s decision only affects rail traffic subject to regulation. Traffic that is not regulated continues to see shippers seeking relief from fuel surcharges.

Last fall more than two dozen companies filed lawsuits against various Class 1 railroads alleging they had conspired to charge excessive fuel surcharges to increase their profits.

STB Issues Notices in 3 Dumurrage Cases

October 8, 2019

In three notices the U.S. Surface Transportation Board is taking on the contention issue of demurrage, which are fees charged by railroads to shippers who hold onto freight cars for a longer period of time than that had set by the carrier.

In Policy Statement on Demurrage and Accessorial Rules and Charges, docket No. EP 757, the STB said it “is issuing this proposed policy statement to provide the public with information on principles the Board would consider in evaluating the reasonableness of demurrage and accessorial rules and charges.”

Public comment is being sought in this case through Nov. 6, 2019, while reply comments are due by Dec. 6, 2019.

The second case is docket No. 760—Exclusion of Demurrage Regulation From Certain Class Exemptions.

In its ruling it said, “The STB proposes to clarify its regulations governing exemptions for certain miscellaneous commodities and boxcar transportation so that those regulations unambiguously state that demurrage continues to be subject to Board regulation.

“The Board also proposes to revoke, in part, the exemption that currently covers certain agricultural commodities so that the exemption would not apply to the regulation of demurrage, thereby making the agricultural commodities exemption consistent with similar exemptions covering non-intermodal transportation.”

Comments on this proposed notice are due by Nov. 6, with reply comments due by Dec. 6, 2019.

The final notice in docket No. 759, Demurrage Billing Requirements, said the STB “proposes changes to the Board’s regulations governing demurrage liability. Specifically, the Board proposes certain requirements regarding Class I carriers’ demurrage invoices, as well as a requirement that a Class I carrier directly bill the shipper if the shipper and warehouseman agree to that arrangement and have so notified the rail carrier.”

Public comments to this notice are due by Nov. 6 with a Dec. 6 reply comments deadline.

Railway Age reported that the cases are in response to shippers who want the STB to rule that railroads cannot unilaterally bill shippers and demand payment without providing more factual information.” observed Railway Age Capitol Hill Contributing Editor Frank. N. Wilner.

The STB had last May held a two day hearing on railroad demurrage and accessorial charges.

That hearing was prompted by significant recent changes in demurrage and accessorial rules made by several Class I railroads.

Report Finds Railroad-Relationship is Dysfunctional

October 3, 2019

A report prepared for a logistics firm in cooperation with Michigan State University has concluded that the relationship between railroads and shippers is dysfunctional.

The white paper produced by consulting firm Maine Pointe said the railroad-shipper relationship is not set up to meet 21st century transportation needs and that tension between the two is hindering shippers’ costs, margins, delivery times, and inventory carrying costs.

Contributing to transportation imbalances between carriers and shippers, the report said, have been unpredictable economic growth, a shortage of truck drivers, increases in environmental restrictions and reduced capacity across North America’s truck and rail network.

However, the report said railroads have been reluctant to commit scarce capacity in a controlled price environment for an extended period, even as earlier track and network reductions have left the system with insufficient slack to cope with upticks in demand or with increasingly unpredictable weather situations.

“Freight tonnage will grow by 40 percent by 2045, and rail will have to play a significant role in creating this extra capacity,” said Nick Little, director of Railway Education at the Center for Railway Research and Education at The Eli Broad College of Business at Michigan State University. “Yet over the past several years, the relationship between shipper and [rail] carrier has become increasingly dysfunctional.”

As railroads have curtailed their payrolls as part of cost cutting measures following in the wake of the implementation of the precision scheduled railroading operating model, there has been a

breakdown of communications between rail organizations and shippers.

Shippers want the same level of information and communication on their consignments as consumers receive when ordering online from Amazon.

The report argues that railroad business models need to move toward a more advanced supply chain management model characterized by end-to-end supply chain integration and value creation.

Carriers and shippers need to become more collaborative while finding mutual cost savings, margin improvement and growth opportunities.

The parties also need to evaluate their buy-make-move-fulfill supply chains to eliminate bottlenecks, enhance throughput and optimize the size of shipments.

Finally, the parties need to put these programs into practice across the entire supply chain, from the client’s client, to the shipper, through to the carrier and its supply base.

Shippers Vent About Adverse Effects of PSR

July 31, 2019

Shippers grumbled about the effects of the precision scheduled railroading operating model at a forum sponsored last week by a congressional committee, saying they are bearing the brunt of the effects of work force cuts and poor service.

The event was sponsored by the U.S. House of Representatives’ Subcommittee on Railroads, Pipelines, and Hazardous Materials.

No railroads that practice PSR were invited to participate.

Many of the shippers were critical of poor communication on the part of the railroads to explain operations changes.

“A combination of poor service and rising costs over the last few years is not only unacceptable — it falls in the category of unimaginable,” said Mike Amick, a senior vice president at International Paper.
Although the boxcars used by his company may arrive at a local yard on time, cuts in local service means delivery of those cars to the mills is often delayed.

“So the cars are close enough to touch but we can’t really reach them or access them,” he said adding that creates bottlenecks at mills that operate 24 hours a day.

Some shippers acknowledged that railroads need to become more efficient and that increases in profits could be used to fund investment in the rail network.

But they said that PSR in practice has rewarded investors to the detriment of customer service.

Echoing the comments of Amick, Ross Corthell, vice president of transportation at Packaging Corp. of America and head of the National Industrial Transportation League’s rail freight committee, said under the PSR model Class 1 railroads do well in measuring the performance of their road trains, but not local service.

“This is where railroads do a horrific job,” he said. “They’re very unpredictable, they make resource planning at our facilities almost impossible, and yet they don’t measure that service at all.”

Corthell said at one of my company’s mills, the railroad serving it missed scheduled switches 22 percent of the time with the carrier’s local showing up up at any hour of the day.

“Precision Scheduled Railroading is anything but precise at origin and destination,” he said.

Shippers who use unit trains said they also have seen shoddy service.

“They may claim that PSR improves service but our experience, and that of many other shippers, has been the opposite,” said Emily Regis, fuels resource administrator the Arizona Electric Power Cooperative, which also has plants in California and New Mexico.

She said the round-trip transit times from a coal mine to a New Mexico power plant used to average three to four days, but has doubled amid what Regis said are PSR-related power and crew shortages.

U.S. Rep. Dan Lipinski (D-Illinois) said he convened the shipper forum as a follow-up to the U.S. Surface Transportation Board’s demurrage and accessorial hearing.

Lipinski said no one disputes that the Staggers [deregulation] Act of 1980 has been successful, but companies need cost-effective and reliable rail service to compete in the global economy.

Some of the disputes over service are an outgrowth of effort by railroads to use demurrage and accessorial charges as a carrot and stick approach to prompt shippers to turn over rail cars more quickly. The railroads say that will reduce congestion and result in better service.

The practices, the railroads content, are designed to customer behavior and not generate additional revenue.

But shippers counter that these charges are one-sided, unavoidable, and lack reciprocity when a railroad doesn’t provide service as scheduled.

Shippers also said that demurrage bills are often riddled with errors and challenging them is burdensome.

“The entire burden of proof is on the shipper to prove the railroad’s invoice is inaccurate,” said Randall Gordon, head of the National Grain and Feed Association.