Top Five Freight Stories, August 1, 2016

Railroads Must Switch Cargo to Rivals Under Proposed U.S. Rule (Bloomberg, July 27, 2016). Five years after the National Industrial Transportation League requested it, the Surface Transportation Board (STB) is proceeding with rulemaking for a form of reciprocal switching.  Here is how the STB explains the concept in its decision:

“Under reciprocal switching, or as it is sometimes called, “competitive switching,” an incumbent carrier transports a shipper’s traffic to an interchange point, where it switches the cars over to the competing carrier. The competing carrier pays the incumbent carrier a switching fee for bringing or taking the cars from the shipper’s facility to the interchange point, or vice versa, which is incorporated into the competing carrier’s total rate to the shipper.  Reciprocal switching thus enables a competing carrier to offer its own single-line rate to compete with the incumbent carrier’s single-line rate, even if the competing carrier’s lines do not physically reach a shipper’s facility.”

The STB is proposing its own standards and criteria for when the proposed reciprocal switching arrangement is (a) practicable and in the public interest or (b) necessary to provide competitive rail service; railroads could counter by proving that the reciprocal switching is not feasible or is unsafe. The Rail Customers Coalition contends that the STB’s decision “follows years of deliberation and strong calls from shippers to adopt reforms in response to soaring freight rail rates and poor service.”  The JOC reported that AAR CEO Ed Hamberger responded, “Imposing new regulations like this are a step backward from the deregulatory path that has allowed railroads to make the capacity investments required to meet customer demand and further modernize a nationwide rail network that benefits shippers and consumers.” In the context of an economic environment of low freight volumes and reducing freight capacity, this STB move seems to add to the current ascendency of shippers, who’ve also been wresting lower rates from trucking firms in rate negotiations this spring and summer.

US shippers face tough road to gain national port productivity metrics (Journal of Commerce, July 25, 2016). Members of the Port Performance Freight Statistics Working Group gathered on July 15 in response to a congressional mandate to create a group advise the USDOT on how to measure port productivity and throughput, but they seemed to adopt the Talking Heads’ “Once in a Lifetime” as their theme song:  “And you may ask yourself, well, How did I get here?”  The National Retail Federation was enthusiastic about the process, having prevailed on Congress to include it in the FAST Act.  Others were less so--John Gray of the AAR said, “Just because Congress says 'Go collect data' doesn’t make it a good idea.”  Longshoremen and other union leaders were suspicious of data that might be used against them in collective bargaining, and some port authorities are not convinced that all private terminal operators would share necessary information. On the other hand, Gene Seroka, Executive Director of the Port of Los Angeles, told his fellow committee members, “This legislation was called for by numerous cargo owners because of perceived and real lack of transparency.  We in the industry put ourselves in this position.”

Feds drop proposal to prioritize freight trains over Amtrak (Hill.com, July 28, 2016). Late last year, the STB announced that when reading federal statutes that created the nationalized passenger rail services back in the 1970’s, they weren’t certain that Amtrak necessarily had to be given absolute preference for its passenger trains over freight trains when operating on freight rail lines. Railroads were unsurprisingly supportive of the proposal, as parties exchanged comments to the STB by the close of its comment period this past March. On Thursday, the STB pulled an Emily Littella, withdrawing the proposal to rethink the preference (also described in this WSJ article). Amtrak, pleased with the decision, promised to work with freight railroads “to ensure that passengers arrive at their destination on time, improving their travel experience while lowering Amtrak operating costs and increasing revenues.”  The AAR also issued a similarly anodyne statement: “The freight rail industry will continue to work with Amtrak to provide dependable passenger service in the country.”

ILWU to consider vote on early contract talks (Journal of Commerce, July 28, 2016). The International Longshore and Warehouse Union (ILWU, the West Coast longshoremen’s union, distinct from the International Longshoremen’s Association, who covers the other Coast) announced that it was calling delegates to San Francisco August 10 to 12 to consider voting to begin talks with the Pacific Maritime Association to extend the current coast-wide contract beyond its 2019 date. The PMA first floated the idea in March, but the recent opening of the expanded Panama Canal and its possible effects on coastal container traffic market shares may have goosed the ILWU to consider the extension, in order to calm jittery shippers still anxious after last year’s months-long labor strife.  The ILA and the United States Maritime Alliance (the East Coast equivalent of the PMA) have already been discussing extending their own current labor agreements beyond 2018.

The magic and mystery of the Zipper Merge (Fleet Owner, July 29, 2016). A number of state DOTs are trying to explain to motorists that using both lanes of traffic leading to a lane reduction point in work zones and executing a “zipper merge” (one car after another taking turns) allows traffic to move faster than waiting in one lane in advance of the merger (as soon as you see the lane reduction sign) and being annoyed at drivers going around you.  Professional truck drivers understand the benefits of the zipper merge, and some DOTs are launching public education campaigns and videos to overcome the psychological barriers to the zipper merge, a concept called “belief perseverance.” Dr. Dwight Hennessy, professor of psychology at Buffalo State explains, "When a person drives down the merging lane, we assume they are a jerk; that they're getting away with something because they're moving ahead of us. Now, because they are a jerk, and they're breaking the rules, we are not obligated to let them in.”  Tom Vanderbilt began his excellent 2008 book, “Traffic” with a discussion of this merging phenomenon. Missouri DOT has produced this video using people holding cardboard cars being watched by children to get the point across.