Imagine your production lines grinding to a halt and customers walking away due to delayed shipments caused by inefficient rail service. Wouldn't you want another option? The U.S. Surface Transportation Board (STB) has extended the reply comment period for Docket No. EP 711—a proposed rulemaking on "Reciprocal Switching for Inadequate Service"—by two weeks to December 20. This move brings fresh hope to rail freight users and may herald significant changes in the American rail industry.
STB Extends Comment Period for "Reciprocal Switching" Proposal
The Washington, D.C.-based STB, an independent adjudicatory and economic regulatory agency authorized by Congress to resolve rail rate and service disputes, has granted stakeholders additional time to analyze and respond to its proposed rule. This extension aims to ensure the final regulation is both comprehensive and practical.
On September 7, the STB unanimously issued a Notice of Proposed Rulemaking (NPRM) focused on rail service, with "reciprocal switching to address inadequate service" as its central theme. The STB explained this NPRM seeks to provide freight rail shippers "access to reciprocal switching as a remedy for poor service."
Reciprocal Switching: Challenging Monopolies, Improving Service
Reciprocal switching has long been a contentious industry issue. Simply put, it allows one railroad that physically serves a shipper's facility to transfer rail traffic to another railroad that doesn't directly serve that facility. In return, the second railroad pays the first a per-car fee. This gives shippers more service options.
While the STB previously proposed reciprocal switching legislation in 2016—permitting shippers to choose an alternative railroad under specific conditions—the September NPRM differs significantly. The new proposal creates a streamlined process for terminal-area shippers to obtain reciprocal switching agreements when rail service fails to meet any of three performance standards.
The STB stated these standards reflect "minimum levels of rail service below which shippers would be entitled to relief," with each standard providing "an independent pathway for petitioners to obtain a reciprocal switching agreement prescription." The agency emphasized these are "designed to be clear, uniform standards using Board-defined terms and applied consistently across Class I carriers and their affiliates."
Three Performance Standards: Quantifying Service, Protecting Rights
The STB's proposed performance metrics include:
- Service Reliability: Measures how often Class I railroads successfully deliver shipments within 24 hours of their Original Estimated Time of Arrival (OETA). The proposal suggests requiring 60% success in the rule's first year, increasing to 70% thereafter.
- Service Consistency: Evaluates railroads' ability to maintain efficient transit times. Shippers could petition for relief if average transit times increase by 20-25% compared to the same 12-week period from the previous year.
- Inadequate Local Service: Assesses railroads' success in performing local deliveries and pickups within service windows. The proposal sets an 80% success threshold over 12 weeks, with service windows never exceeding 12 hours.
The STB noted these metrics finally provide shippers with long-sought data about crucial first-mile/last-mile service. Importantly, the rule would require Class I railroads to provide historical service metric data within seven days of customer requests—marking the first standardized reporting of these metrics across all major carriers.
Breaking the Deadlock, Reshaping the Industry
STB Chairman Martin Oberman noted in September that the board has considered various approaches to reforming reciprocal switching since 2010, aiming to give captive shippers realistic opportunities to obtain switching orders. He observed that despite Class I operators shrinking from over 40 before 1980 to just six today, no rail shipper has successfully obtained a reciprocal switching order in over 40 years, with none even petitioning the STB for one since before 1990.
"The Board has decided to focus its reciprocal switching efforts on providing relief to rail customers suffering from poor service," Oberman said. "By issuing today's NPRM, the Board is proposing that one way to improve rail service is to give affected shippers the opportunity to obtain reciprocal switching with a competing Class I carrier when service falls below standards set in the proposed rule."
At the recent RailTrends conference in New York, industry analyst Tony Hatch highlighted that this NPRM differs from previous proposals by being service-based rather than mileage-based. Meanwhile, Association of American Railroads President Ian Jefferies acknowledged the STB's shift from its 2016 proposal—which the AAR considered "backdoor rate regulation"—to this service-focused approach, while cautioning that "the devil is always in the details" regarding implementation.