Railway Supply Institute Petitions for Urgent Reforms to Prevent Economic Derailment

Citing a looming supply chain crisis amid a dwindling number of active boxcars in the U.S., the Railway Supply Institute (RSI) has filed a petition with the Surface Transportation Board (STB) seeking review of the current rules for setting compensation to boxcar owners to avert a “boxcar cliff.” 

Current rules disincentivize the necessary construction of new boxcars to replace cars hitting their maximum operating age, as evident by the fact that America’s boxcar fleet size has declined by 38% since 2008 and is expected to decline another 22% by 2030. A major culprit in the decline is the longstanding car hire Arbitration Rule, approved in 1994 by the Interstate Commerce Commission, which keeps leasing rates paid by railroads for boxcars artificially low and therefore reduces incentives for new construction. 

The Arbitration Rule assigns each railcar a Default Rate, often as meager as 17 cents per hour for a boxcar costing over $150,000 to build, which is wholly inadequate considering this rate has not changed in decades and the costs associated with manufacturing new boxcars. Although railroads can agree on a rate for boxcars, the Arbitration Rule has kept these rates stagnant, well below levels necessary to purchase a new car today. The resulting boxcar shortage threatens the significant amount of commodities shipped via boxcar every day. 

“America is plunging toward a boxcar cliff as many cars are hitting their 50-year expiration date and not being replaced because the Arbitration Rule suppresses boxcar rates far below competitive levels, “said Patty Long, President of the Railway Supply Institute. “The current car hire system discourages investment in this integral component of our rail transportation fleet, with boxcars providing efficient shipping for crucial American commodities. We can’t afford to fall off the boxcar cliff. Reform is needed now.” 

Freight railroads currently leverage the unfair Arbitration Rule to force non-railroad boxcar owners to accept low, non-compensatory rates that are disconnected from supply and demand forces. The Arbitration Rule should result in a fair price that appropriately incentivizes new construction and secures supply chain stability. 

Additionally, for every boxcar shipment not made, three additional trailer trucks are needed to transport the same amount of cargo. Large trucks have been proven to be less safe than shipping by rail, increase wear and tear on roads, and worsen environmental conditions. 

“The alternative to a vibrant rail infrastructure is more heavy trucks used in freight shipping, which would further damage highways, pollute the environment, increase traffic and ultimately raise costs. Transporting cargo by rail is essential to meeting the demands of the world’s largest economy, and moving goods efficiently and sustainably across the U.S.,” Long added. 

Once the petition is filed, stakeholders have 20 days to respond with comments. Following the STB’s review of any responses, the agency will determine whether to reopen the decision to approve the Arbitration Rule and solicit comments on whether to condition or terminate the approval. 

For more information, visit www.boxcarcliff.com.