Shippers and Switching Policy

Thank you Mr. Shortline for sharing your learned thoughts with the Forum.

Now the reciprocal switching matter DID cross my eye, had the NP been obligated to open their on-line industries, which they weren't, the MILW Lines West could well be around today (not necessarily operated by the MILW, but someone to provide competion through the Northern Tier).

True, SOME concessions were granted owing to the BN merger. For example, the MILW could make rates at or through Billings. There was also the Portland access enabling an interchange with the SP as well as making rates.

There was also an interchange established at Sumas WA with the CP to enable competition with the BN.

Now I'm not saying about the track condition, which today would be FRA 2 at best.

The Midwest was largely open for reciprocal switching with the MILW and both the C&NW and Rock Island. But the MILW was disadvantaged. For example I can recall at Mason City cars originating at our industries being switched to the C&NW for a line haul to Portland OR with the UP. I asked our Agent there (like an enquiring mind Management Trainee) "why can't we have the line haul to the Coast". "They got the cars; we don't."

Apropos of the above, I recall a letter from a shipper to Railway Age (or maybe Traffic World) in response to a survey the magazine was conducting to determine whether shippers needed access to more than one railroad: "Our plant is served by six railroads (this was back in the sixties) and not one of them can give me any cars." The writer said he'd be satisfied with one or two railroads that could supply clean cars on request -- of course there's a big difference between being served by one railroad and by two. Reciprocal switching can look better on paper than in practice, however -- if the portion of the revenue accorded to the carrier doing the switching is noncompensatory there will be no incentive to show any hustle in delivering the car to its competitor. Since reciprocal switching will inevitably add at least a day to the total transit time, the service probably won't measure up to what the shipper would get using his "home" road. Since the total cost of the movement will inevitably be more than if only one railroad were involved, the matter of compensation to the switching road could very well end up before the STB, with a result satisfactory to neither party (the former ICC was often a textbook example of "be careful what you wish for"). If the railroads ever snap out of the delusion they call PSR they may find that providing service to shippers will result in a better return than antagonizing them (as well as obviating the need to lengthen sidings for less-frequent trains).

Both CSX/Pan Am and CN/KSU are end-to-end mergers and don't present much in the way of anti competitiveness. But look out. It's political. What a shame if this derails the Pan Am deal. Best thing to happen for New England rail freight since the Patriot Corridor and in my lifetime.

Mr. Ex Con, there are some reciprocal switching tariffs that went "deep" into the other guy's turf. I of course think of the one that allowed the MILW to access and make rates at Billings MT. You can be sure that the BN did "not exactly graciously" grant this to the MILW, but rather simply part of "the condemned's last meal". Rather than interchange the cars to the MILW at, say, Miles City, they'd keep them until Minneapolis - and not be in any rush to get them there.

Now a present day continuation of this long switch exists with a Toyota assembly plant near San Antonio. I could have this confused, but the facility is deep into UP (SP) territory. Naturally, Toyota, being a large shipper of high value lading - parts in, finished Tundras out, wanted access to both roads, so as a condition of both BNSF and UP mergers, either road could make rates for that clearly on the T&NO shipper.

I'm just working from memory on this one, so informed corrections - please bring 'em on.

Split from the Biden gives STB guidance thread.

Gilbert B Norman wrote: ↑Fri Jul 09, 2021 7:35 am
Now a present day continuation of this long switch exists with a Toyota assembly plant near San Antonio. I could have this confused, but the facility is deep into UP (SP) territory. Naturally, Toyota, being a large shipper of high value lading - parts in, finished Tundras out, wanted access to both roads, so as a condition of both BNSF and UP mergers, either road could make rates for that clearly on the T&NO shipper.

I'm just working from memory on this one, so informed corrections - please bring 'em on.

BNSF trains pass through San Antonio on a daily basis as BNSF's busiest interchange with the Mexican railroad, Ferromex, is at Eagle Pass, TX. BNSF ships refined petroleum products, grain, and even Taconite pellets to Mexico through that interchange.

Thanks, Mr. JayBee, my information on the matter I acknowledged in my immediate needed perfection.

Now of interest is how many other on-line industries are open to BNSF. Does the trackage rights they have with the UP allow them to solicit traffic from any, or is it an "overhead" arrangement.

But my understanding regarding Toyota facility is that either road can solicit traffic and make rates. If the facility is switched by UP, then a reciprocal switching charge is assessed against BNSF.

"Back in my Day" reciprocal switch charges were delineated in a tariff and were "very nominal" - often only $30 a car (circa 1970). Somehow, I think cars for BNSF line haul are "not exactly" switched at some "bargain basement" rate like an inflation adjusted "above".

That could be the stumbling block if universal reciprocal switching is mandated. There are obvious additional costs if an additional railroad participates, and it's a given that the shipper won't want to pay any more than for a single-line haul. The railroad competing for the line haul will have to absorb the switching charge while offering the shipper a lower rate than he's already getting, so there's going to be a floor somewhere below which a competing railroad won't be willing to go. If a case goes before the STB and a non-compensatory switching charge is imposed, we're going back in time to the pre-Staggers era -- with a day or so extra transit time thrown in.

ExCon90 wrote: ↑Sat Jul 10, 2021 9:18 pm The railroad competing for the line haul will have to absorb the switching charge while offering the shipper a lower rate than he's already getting, so there's going to be a floor somewhere below which a competing railroad won't be willing to go.

"Absorb" was always the case "back in my day".

Continuing with a related thought to that Mr. ExCon presented, it, again, is my understanding that the Toyota facility is clearly on UP/SP/T&NO to the West of San Antonio. Mr. JayBee reports that the BNSF regularly uses that route with some kind of trackage arrangement, be such trackage (you run your trains with crews qualified on my Rules but you stop only for an emergency), haulage (I will handle your locally waybilled cars, but on my trains - and at my convenience) , or joint facility (you can make rates with any of my on-line shippers) is in place as they interchange with Mexican road Ferromex (FCP, SP-M) at Eagle Pass.

But to end up back at Toyota, I must wonder how the parts line-hauled on the BNSF physically move in and the Tundras move out? Can the BNSF stop one of their trains and "work the facility", or must a "job" be called to handle those cars to a physical BNSF interchange. On this point, I'll bet a few of us around here with "Class I in our CV's" just might be curious.

Finally, to close related to the parallel topic from which this topic was "split" (at my request to the Moderator), I don't know why Joe is so concerned about railroads being anti-competitive? The '90's merger movement clearly established that any industry having access to two roads would continue to have it and mechanisms such as Conrail Shared Assets would be formed. I'm not sure when Toyota opened the noted Bexar County facility, but if prior to the several mergers, their only option if they chose to "Shipper's Route" their cars, would be to have the line haul divided between the UP and the BN (interline).

It may be that some shippers have Joe's ear and are telling him that all rates are too high -- a refrain often heard from Fortune 500 companies complaining of exploitation by the railroads ...

Mr. ExCon, lest we forget that, even in the post-Staggers era of "dereg", railroads are still required to "publish" tariffs.

There remain in place, laws against discrimination. and price fixing, now that the ICC "molders in its grave", has been in place since the Sherman Act.

So in short, if Joe's knowledge of railroads, and Pete's for that matter, is limited to that publicly funded 10% of the business otherwise known as passenger, there must be someone within the FRA-DOT-WH chain that could educate them. Pete is smart, and Joe knows how to read and listen.

The Toyota plant has a contractor do all the switching so that all the Class I has to do is pickup or set out what they have for Toyota. I believe that all inbound parts are trucked.

You guys have way too much faith in the fact that Joe might be involved in anything going on right now. From my view in the cheap seats, it certainly appears that he is being very carefully handled and scripted in what he says and does. My opinion is that there are people making decisions without him having a whole lot of involvement or input.

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In theory at least, that's how it should be done. A chief executive of any large organization should not micromanage but rather make certain that his immediate subordinates are well acquainted with his views and act accordingly. In any case we may be sure that the lobbyists know whose ear they need to have and how to reach it.

How this Journal article on reciprocal switching got by me, I'm at a loss to explain:

https://www.wsj.com/articles/railroads- ... 1630584002

Here's a response from a Former STB Chairman (appears to have been appointed by Obama):

https://www.wsj.com/articles/railroads- ... 1631741027

I can only reiterate that "back in my day" with the MILW, reciprocal switching in the Midwest was part of the landscape with the CNW and RI. Now when I was sent out West to the likes of Butte and Missoula to do station audit work, that when I learned that the BN/NP "uh, never heard that term".

The MILW's reciprocal switching rights imposed on the BN, even at gateways such as Billings and Spokane were "over their dead bodies". The service issues were of course "circumspect".