Reciprocal Switching for Inadequate Service

<RULE> SURFACE TRANSPORTATION BOARD <CFR>49 CFR Part 1145</CFR> <DEPDOC>[Docket No. EP 711 (Sub-No. 2)]</DEPDOC> <SUBJECT>Reciprocal Switching for Inadequate Service</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Surface Transportation Board (the Board or STB). <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Board adopts new regulations that provide for the prescription of reciprocal switching agreements as a means to promote adequate rail service through access to an additional line haul carrier. Under the new regulations, eligibility for prescription of a reciprocal switching agreement will be determined in part using objective performance standards that address reliability in time of arrival, consistency in transit time, and reliability in providing first-mile and last-mile service. The Board will also consider, in determining whether to prescribe a reciprocal switching agreement, certain affirmative defenses and the practicability of a reciprocal switching agreement. To help implement the new regulations, the Board will require all Class I railroads to submit certain service data on an ongoing and standardized basis, which will be generalized and publicly accessible. Railroads will also be required to provide individualized, machine-readable service data to a customer upon a written request from that customer. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> The rule will be effective on September 4, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Valerie Quinn at (202) 740-5567. If you require accommodation under the Americans with Disabilities Act, please call (202) 245-0245. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Table of Contents</HD> <EXTRACT> <FP SOURCE="FP-2">Introduction</FP> <FP SOURCE="FP-2">Legal framework</FP> <FP SOURCE="FP-2">Analytical Justification</FP> <FP SOURCE="FP-2">Performance Standards</FP> <FP SOURCE="FP-2">Data Production to the Board and Implementation</FP> <FP SOURCE="FP-2">Data Production to an Eligible Customer</FP> <FP SOURCE="FP-2">Terminal Areas</FP> <FP SOURCE="FP-2">Practicability</FP> <FP SOURCE="FP-2">Service Obligation</FP> <FP SOURCE="FP-2">Procedures</FP> <FP SOURCE="FP-2">Affirmative Defenses</FP> <FP SOURCE="FP-2">Compensation</FP> <FP SOURCE="FP-2">Duration and Termination</FP> <FP SOURCE="FP-2">Contract Traffic</FP> <FP SOURCE="FP-2">Exempt Traffic</FP> <FP SOURCE="FP-2">Class II Carriers, Class III Carriers, and Affiliates</FP> <FP SOURCE="FP-2">Labor</FP> <FP SOURCE="FP-2">Environmental Matters</FP> <FP SOURCE="FP-2">Environmental Review</FP> <FP SOURCE="FP-2">Regulatory Flexibility Analysis</FP> <FP SOURCE="FP-2">Paperwork Reduction Act</FP> <FP SOURCE="FP-2">Congressional Review Act</FP> <FP SOURCE="FP-2">Table of Commenters</FP> <FP SOURCE="FP-2">Final Rule</FP> </EXTRACT> <HD SOURCE="HD1">Introduction</HD> In a decision served on September 7, 2023, the Board issued a new notice of proposed rulemaking that would provide for the prescription of reciprocal switching agreements with emphasis on how to address inadequate rail service. <E T="03">Reciprocal Switching for Inadequate Serv.</E> ( <E T="03">NPRM</E> ), 88 FR 63897 (proposed Sept. 18, 2023). <SU>1</SU> <FTREF/> The Board explained that, given the major service problems that occurred subsequent to the 2016 proposal in Docket No. EP 711 (Sub-No. 1) and the history of recurring service problems that continue to plague the industry, it is appropriate, at this time, to focus reciprocal switching reform on service-related issues. <E T="03">NPRM,</E> 88 FR at 63899. <FTNT> <SU>1</SU>  The Board also closed a sub-docket involving an earlier notice of proposed rulemaking from 2016. <E T="03">Reciprocal Switching,</E> 88 FR 63917 (published Sept. 18, 2023) (closure of Docket No. EP 711 (Sub-No. 1)). </FTNT> As discussed in the <E T="03">NPRM,</E> reciprocal switching agreements provide for the transfer of a rail shipment between Class I rail carriers or their affiliated companies within the terminal area in which the shipment begins or ends its journey on the rail system. <E T="03">Id.</E> at 63898. In a typical case, the incumbent rail carrier either (1) moves the shipment from the point of origin in the terminal area to a local yard, where an alternate carrier picks up the shipment to provide the line haul; or (2) picks up the shipment at a local yard where an alternate carrier placed the shipment after providing the line haul, for movement to the final destination in the terminal area. <E T="03">Id.</E> The alternate carrier might pay the incumbent carrier a fee for providing that service. <E T="03">Id.</E> The fee is often incorporated in some manner into the alternate carrier's total rate to the shipper. <E T="03">Id.</E> A reciprocal switching agreement thus enables an alternate carrier to offer its own single-line rate or joint-line through rate for line-haul service, even if the alternate carrier's lines do not physically reach the shipper/receiver's facility. <E T="03">Id.</E> The regulations as proposed in the <E T="03">NPRM</E> would provide for the prescription of a reciprocal switching agreement when service to a terminal-area shipper or receiver failed to meet one or more objective performance standards and when other conditions to a prescription were met. <E T="03">Id.</E> The proposed standards addressed: (1) a rail carrier's failures to meet its original estimated time of arrival (OETA), <E T="03">i.e.,</E> to provide sufficiently reliable line-haul service; (2) a deterioration in the time it takes a rail carrier to deliver a shipment (transit time); and (3) a rail carrier's failures to provide local pick-ups or deliveries of cars (also known as first-mile/last-mile service (FMLM)), as measured by the carrier's success in meeting an “industry spot and pull” (ISP) standard. <E T="03">Id.</E> at 63901. The proposed regulations also addressed regulatory procedures, affirmative defenses, and practicability. <E T="03">Id.</E> at 63908-10. In addition to proposing to provide for the prescription of a reciprocal switching agreement when the foregoing conditions were met, the Board sought comment on what methodology the Board should use in setting the fee for switching under a prescribed agreement, in the event that the affected carriers did not reach agreement on compensation within a reasonable time. <E T="03">Id.</E> at 63909-10. The proposed regulations would impose certain data requirements to aid in implementation of those regulations. In part, the proposed regulations would require a Class I carrier to provide to a customer, upon written request, that customer's own individualized service data. In addition, to ensure that the Board would have an informed view of service issues across the network, the proposed regulations would (1) make permanent the filing of certain data that is similar to the data the Board had collected on a temporary basis in <E T="03">Urgent Issues in Freight Rail Service—Railroad Reporting,</E> Docket No. EP 770 (Sub-No. 1); and (2) require consistency in reporting that data. <E T="03">NPRM,</E> 88 FR at 63910-11. The Board solicited comments on the <E T="03">NPRM</E> by October 23, 2023, and replies by November 21, 2023. <E T="03">NPRM,</E> 88 FR at 63897. In response to requests for extensions, these dates were extended to November 7, 2023, and December 20, 2023, respectively. <E T="03">Reciprocal Switching for Inadequate Serv.</E> , EP 711 (Sub-No. 2)(STB served Sept. 29, 2023, and Nov. 20, 2023). The Board received many comments and replies from interested parties, including public officials, railroads, shippers, trade organizations, and others. <SU>2</SU> <FTREF/> As discussed below, overall, shippers and their supporting trade organizations strongly favor the Board's proposal, although many seek minor modifications or, in some instances, significant expansions to the scope of the proposed rule. The railroads and their trade organizations generally object to the Board's legal foundation for the proposed regulations and otherwise suggest significant changes to those regulations. <FTNT> <SU>2</SU>  A Table of Commenters with abbreviations the Board uses in the text and citations is provided below. </FTNT> After reviewing the record, the Board is adopting a version of part 1145 that reflects certain modifications to the proposal in the <E T="03">NPRM.</E> With respect to the performance standards in part 1145, some of the key modifications are as follows. First, based on numerous shipper comments and the data the Board had been collecting since 2022 in Docket No. EP 770 (Sub-No. 1), the Board is increasing the OETA standard for delivering within 24 hours of the OETA from 60% to 70% and the standard for performing ISP from 80% to 85%. Second, the Board is adopting a proposal whereby railcars that are delivered more than 24 hours before the OETA will count in assessing the rail carrier's performance. Third, the Board is establishing an absolute floor for the service consistency standard and will modify that standard to provide that certain deteriorations in transit time over a three-year period would also count as a failure. Fourth, the Board is withdrawing its proposal to combine lanes; the service reliability standard and the service consistency standard will be applied only to each individual lane of traffic to/from the petitioner's facility. Finally, in response to public comments, the Board makes other modifications to each performance standard. As discussed in the <E T="03">NPRM,</E> the performance standards apply only to petitions under part 1145; the standards do not by themselves establish whether a carrier's operations are otherwise appropriate. The Board does not vie ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 537k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━