Critics say BNSF trailer policy will add to capacity shortage

By John D. Schulz -- Logistics Management, 7/1/2005

FT. WORTH, TEXAS—The BNSF Railway announced in May that it would no longer supply and manage rail trailers on its intermodal network. That policy, shipper interests say, could exacerbate capacity constraints during this fall's peak shipping season. But the railroad responds that the move will allow it to concentrate on its line-haul responsibilities, and calls predictions that it will cause a trailer shortage "hyperbole."

"We continue to offer trailer services," says BNSF spokesman Richard Russack. "We're not getting out of the trailer business. In fact, it's growing quite significantly."

Under the plan, BNSF will no longer supply empty trailers to customers and will turn trailer management back to the leasing companies that own the equipment. The transition back to leasing companies will occur in phases through the middle of 2006.

The policy change appears to be headed to the federal Surface Transportation Board (STB) for review. WTL, a leasing company that owns a fleet of 1,000 48-foot trailers, has filed a complaint with the STB over the change, claiming it violates BNSF's obligations as a common carrier.

Although the STB rarely cracks down hard on Class I railroads, transportation law experts are saying the agency might have grounds to rule against BNSF in this case. Railroads are statutorily obligated to provide a sufficient number of cars to satisfy their customers' needs, explains Washington transportation lawyer Fritz Kahn. With the advent of piggybacking, rails began offering trailers, some owned and others leased. "To the extent BNSF says, 'No dice,' they are withdrawing from their common carrier obligations," he says.

If the STB takes no action against BNSF, other railroads could follow suit and adopt similar policies. Meanwhile, five other Class I railroads are not accepting trailers that can no longer be interlined with BNSF.

Terry Whiteside, a transportation consultant and chairman of the shipper group Alliance for Rail Competition, says BNSF's decision is part of a larger movement by railroads to shift more costs onto shippers. "They're offloading everything except the linehaul," he says. "The big [shippers] can do fine. But the smaller shippers, the backbone of the industry, are left with very few options that are financially viable."

BNSF's Russack says shippers' increasing reliance on door-to-door intermodal service providers that supply their own equipment was a major factor in the carrier's decision. He estimates that about 90 percent of existing intermodal business uses private equipment.

But critics argue that the policy could end up doing more harm than good. WTL claims the move will contribute to an anticipated shortage of trailers during this fall's peak shipping season. Another opponent, Larry Henry, vice president of logistics for intermodal marketing company Alliance Shippers, has estimated that BNSF's policy could divert as many as 648,000 additional trailers onto the highways.

The railroad disagrees, saying its trailer policy will result in greater efficiency, not less. "Private equipment always has had higher utilization rates," Russack says. "Private transportation rates are lower than rail-controlled rates. BNSF doesn't have to pass on the cost of that asset management to its customers. In a way, this is good for the marketplace."

But ARC's Whiteside was skeptical that the carrier's new trailer policy would actually bring about lower rail costs. "The reality is you're not going to see massive reductions in line-haul rates," he says.