DC Velocity - April 2013

Shipper group says reciprocal switching could save rail users big money

A leading shipper group has said rail users would save between $900 million and $1.2 billion a year in freight costs if the federal government adopted the group’s proposal governing reciprocal switching between the nation’s four major railroads.

The National Industrial Transportation League (NITL), in unveiling a 160-page report supporting its July 2011 proposal, said new switching rules would provide badly needed service alternatives to so-called “captive shippers,” companies that cannot use another mode of transportation or even another railroad to move their traffic.

Under reciprocal switching, a railroad, for a fee, switches carload freight to another railroad to give a captive shipper access to facilities it might not otherwise be able to use. The switching charges are paid by the receiving railroad. The customer pays the originating railroad, which would build the switching fee—and perhaps an additional amount— into its overall charges to compensate it for the revenue foregone by switching the traffic to its rival for carriage.

The NITL proposal would allow a captive shipper or
receiver to gain access to a second rail carrier if the cus-
tomer’s facility is located within a 30-mile radius of an
interchange where regular switching occurs. Only true cap-
tive customers—defined by NITL as businesses with no
alternatives from other railroads or other modes—could
qualify. The switch would not occur if the affected railroad
could prove the practice would be unsafe or is unfeasible or
harmful to existing rail service, the shipper group said.

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