We have written before regarding the proposed new rule now under consideration by the Surface Transportation Board (STB) known as “Reciprocal Switching”. In a recent posting, Inside Sources (IS) summarized the various arguments pro and con of this proposed regulation, under which railroads that serve a captive industry would be required to switch out cars and deliver them to another, competitive railroad.

In the IS article, they include the following comments and information;

  • Shippers believe this new rule would create competitive, and pressure railroads to reduce their rates and work more to improve service;
  • Railroads believe the new requirements, if adopted, create delays in shipments and force additional complexity in their programs;
  • One economist indicated it would reduce investment by railroads in their systems and, overall, increase costs.
  • Consumer experts believe the new requirements could create more problems for shippers with “bottlenecks and delays”.

Others are quick to point out that all railroads already face stiff competition from other modes of transportation, trucks being just one option. Another option that affects rail competition is the natural set of choices any industry has in geographic location of their supply chain elements, meaning that railroads must work with their customers to help them obtain and maintain business.

What is clear that given the challenges that railroads have these days to recruit workers and maintain stable systems, should the STB adopt this proposed new requirement, there will likely be some degree of disruption to the systems that are already struggling to overcome supply issues.