Freight Rail Overregulation: What You Need to Know

Freight rail interests are calling upon federal regulators not to burden their industry with additional mandates, that they say could hinder investments for innovation. The Biden Administration (via executive order) recently charged the Surface Transportation Board to promote competition and economic opportunity and to resist monopolization within the freight rail industry. Back in July, the board asked Class I railroads to explain how they were going to address the congestion that has been occurring at intermodal terminals.

Last week, the Association of American Railroads (AAR) urged the STB to allow container movements to be subject to regulation that would change how much demurrage a freight railroad could charge for the delayed pickup of containers, reported by Freightwaves. The AAR reiterated points made by several Class I railroads saying the storage fees serve as an incentive for customers to pick up their containers.

Timothy J. Strafford, legal counsel for AAR has his own insight on the matter saying, “Even partial revocation in this instance would not mitigate the problem and would have unintended consequences. Capacity at rail terminals is finite. To maintain terminal and network fluidity, railroads use storage fees to incentivize the prompt removal of containers.” “The supply chain congestion occurring for international intermodal is “caused by factors beyond the Board’s regulatory regime,” Stafford further explained.

While freight rail supporters are asking the STB to define the boundaries of regulation, CN and Canadian Pacific say they are doing their part at their respective terminals to manage the congestion seen by the wider supply chain. Other Class I railroads have also responded back to the inquiry the STB sent out regarding how to manage the congestion of international intermodal containers at rail terminals.

A few steps that CN has taken to abide by the STB’s request is establishing quarterly capacity commitments for ocean carriers, providing rebates for those picking up containers during off-peak hours and long weekends at CN terminals in various cities, as well as investing in terminal enhancements. If you would like to learn more about this, contact our team today!

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