STB holds hearing on commodity and boxcar exemptions

Earlier today, the Surface Transportation Board (STB) held a hearing, entitled “Review of Commodity, Boxcar, and TOFC/COFC Exemptions.” The STB said the objective of the hearing is to review regulatory exemptions for certain types of rail traffic to determine their effectiveness in the marketplace, see whether the rationale behind these exemptions should be revisited, and also if these exemptions should be subject to periodic review.

By ·

At a time when legislation designed to re-regulate and remove antitrust immunity of the freight railroad industry has become commonplace, there is now another regulatory issue regarding railroads being debated.

Earlier today, the Surface Transportation Board (STB) held a hearing, entitled “Review of Commodity, Boxcar, and TOFC/COFC Exemptions.” The STB said the objective of the hearing is to review regulatory exemptions for certain types of rail traffic to determine their effectiveness in the marketplace, see whether the rationale behind these exemptions should be revisited, and also if these exemptions should be subject to periodic review.

It is also examining exemptions from regulation for certain types of rail traffic in which there is significant competition among railroads for customer business, with these exemptions directed by Congress in an effort to remove government regulation, stimulate industry growth, and allow competition to work in the marketplace, according to the Association of American Railroads (AAR)

This hearing follows the recent reintroduction of legislation focused on addressing the concerns of rail shippers, regarding rates and service, as well as making the railroad industry more competitive, and separate legislation centering on bringing the freight rail system under the nation’s anti-trust laws and provided needed protection for various rail customers who have suffered from increased rates and decreased quality of service, according to the bill’s authors.

In comments submitted to the STB, AAR President Edward Hamberger said that today’s rail regulatory policies are the very reason freight railroads are such a critical part of the U.S. economy and vital to our nation’s financial recovery. And he added that changing regulations creates an air of uncertainty that could harm the country’s economic recovery and negate the railroads’ ability to sustain capital infrastructure investments.

“Freeing the railroads from unneeded regulation, the exemptions have led to increased competitiveness, enhanced service offerings, and increased productivity and efficiency, which continue to benefit the customers railroads serve and the public at large,” said Hamberger. “The Nation needs railroads to continue to invest significant private funds to grow and to keep freight on tracks instead of flooding the highways. They will be able to make those investments only if the federal government maintains a consistent, coherent, and transparent regulatory regime that allows railroads and their investors to pursue returns on their enormous investments.”

In testimony submitted by Ford Motor Company, the automotive manufacturer said that while it is not submitting specific issues or concerns for the STB to solve, it instead noted it is interested in hearing the debate of the pros and cons of revoking existing commodity exemptions in the context that doing so may promote competition without constraint and provide for remedies where appropriate.

“The consolidation of railroads over time, combined with the inherent constraints associated with railroad owned infrastructure have resulted in limited opportunity for competition,” said Ford. “And though trucking provides a transportation alternative, it is not a viable economic alternative to rail on balance and we…have a keen interest in ensuring a highly competitive transportation landscape.”

Kirk R. Light, vice president, Logistics, Planning & Transportation, at Houston-based CEMEX Inc. explained in his testimony that the majority of CEMEX’ products in the U.S. not shipped directly to production sites are shipped by rail to distribution centers and subsequently delivered by truck to its customers, with the majority of the company’s rail routes being captive.

Light said that CEMEX is increasingly dependent on rail transportation and seeks the removal of rail commodity exemptions so that fair and reasonable freight rates and service can be maintained as changes in the rail industry, as well as the cement industry, “have significantly reduced transportation alternatives.”

While shippers clamor for changes to improve access to competition, railroads maintain that the existing regulatory railroad environment for has produced—for North American railroad shippers—a freight railroad system that is the best in the world. And if the railroad industry lost the ability to earn its cost of capital it could have a negative effect on capital investments to support traffic growth and reverse the strides made post-Staggers Act in the areas of rail safety and service reliability.

For more stories on railroad shipping, please click here.


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Latest Whitepaper
Improving Packaging: The Cost of Shipping Air is Going Up
Retailers and manufacturers that insist on using inefficient and sloppy packaging methods—oversized boxes, inefficient packaging, poorly constructed palletized contents—are paying for their mistakes in sharply higher freight rates. Pitt Ohio White Paper, Logistics White Paper, Dimensional Packaging
Download Today!
From the July 2016 Issue
While it’s currently a shippers market, the authors of this year’s report contend that we’ve entered a “period of transition” that will usher in a realignment of capacity, lower inventories, economic growth and “moderately higher” rates. It’s time to tighten the ties that bind.
2016 State of Logistics: Third-party logistics
2016 State of Logistics: Ocean freight
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Getting the most out of your 3PL relationship
Join Evan Armstrong, president of Armstrong & Associates, as he explains how creating a balanced portfolio of "Top 50" global and domestic partners can maximize efficiency and mitigate risk.
Register Today!
EDITORS' PICKS
Regional ports concentrate on growth and connectivity
With the Panama Canal expansion complete, ocean cargo gateways in the Caribbean are investing to...
Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....

Top 25 ports: West Coast continues to dominate
The Panama Canal expansion is set for late June and may soon be attracting more inbound vessel calls...
Port of Oakland launches smart phone apps for harbor truckers
Innovation uses Bluetooth, GPS to measure how long drivers wait for cargo