WASHINGTON (September 7, 2023) – The Surface Transportation Board (STB) has issued a new proposal for long-awaited reforms to its reciprocal switching rules, marking an important step toward improving access to competitive rail service.
Reciprocal switching allows a shipper served by a single railroad to request that its freight be transferred to another major railroad at a designated interchange point. When Congress adopted the Stagger’s Rail Act, it envisioned such a process as a way to promote freight rail competition. But due to antiquated rules adopted by the STB, shippers are effectively blocked from being able to transfer cargo from one railroad to another.
In today’s decision, the STB proposes to allow a shipper to obtain reciprocal switching when its current railroad fails to meet specified service performance standards.
Why It Matters
Competitive pricing and reliable service are no longer the norm as the country continues to pay a heavy price for the railroad industry’s growing monopoly power. Service failures have contributed to higher prices and supply chain disruptions for food, fuel, and countless other products.
Unfortunately, like most rail customers, ACC member companies lack access to competitive rail service, leaving them without market remedies when faced with unreasonable rates or service failures. More than three-quarters of companies said access to reciprocal switching (77%) would help mitigate freight rail problems, according to a supply chain survey conducted earlier this year.
Numerous Benefits
Promoting competition is key to making the rail sector more attractive and viable to move freight. Implemented broadly, reciprocal switching can help unlock market forces, which reduces the need for government intervention and helps head off rate and service issues. It can also open more service options and alleviate congestion in the rail network.
Canada has demonstrated that reciprocal switching can promote competition and support the financial health of rail companies. Greater competition among freight railroads will benefit manufacturers, farmers, energy producers and, as a result, American consumers.
Bottom Line
More than 35 years have passed since the STB established its competitive access policies. The STB first proposed reciprocal switching reforms in 2016 and has painstakingly considered extensive data and public comments.
“Removing regulatory barriers to competition through reciprocal switching is one of the most important changes the STB can make to improve rail service and help prevent future problems,” said Jeff Sloan, Senior Director of Regulatory and Scientific Affairs. “While it’s disappointing that the Board is abandoning reciprocal switching as a mechanism to more broadly promote competition, we are hopeful that the revised proposal can offer meaningful relief to shippers when a railroad fails to meet objective service standards. We welcome the opportunity to work with the Board on finalizing this long overdue reform.”
