STB addresses Class I railroad CEOs regarding international intermodal supply chain issues

Late last week, Martin Oberman, Chairman of the Surface Transportation Board (STB), an independent adjudicatory and economic-regulatory agency charged by Congress with resolving railroad rate and service disputes and reviewing proposed railroad mergers, issued letters to leadership at all seven North American Class I railroads regarding international intermodal supply chain issues.

In the letter, Oberman expressed his concern regarding persistent problems with congestion in the international supply chain, as well as significant container storage fees shippers are being required to pay in order to receive their containers. And he is asking the Class I railroads to provide certain information about the extent of congestion at key container terminals and also policies and practices for assessing storage charges.

STB also noted that the objective of this request is to help to better understand the magnitude of container congestion and also the purpose and effect of storage fees and whether receivers are afforded relief when they lack the ability to facilitate the release of their containers.   

“The Board has received numerous reports related to the length of time that containers are being held in rail yards, and the sizeable storage fees (‘demurrage’) some customers have been required to pay in order to obtain release of containers bearing their shipments,” Chairman Oberman wrote. “The Board’s principal concerns are helping to mitigate the congestion problems at intermodal yards caused by the unprecedented economic situation, improve network fluidity, and provide relief to shippers and receivers who are not in a position to reasonably avoid onerous and potentially business-threatening storage charges.”

An industry stakeholder told LM that more competition among railroads is not the way to get out of this current predicament.

“What is needed is more cooperation, in the form of closer lanes to short lines for the first- and last-mile, and better cooperation with drayage companies, which shippers like,” he said. “The problem is that each piece of the supply chain is getting hammered, with either too much volume, too few workers, or both.”

This letter comes at a time when congestion issues have become exacerbated, due to various factors, including: the reopening of the economy; elevated demand levels; and labor availability at ports; container and equipment imbalances, among others.

What’s more, it follows a late May letter sent by Oberman to North American Class I CEOs, asking for updates on their preparedness to meet demand for rail service amid the ongoing economic recovery from the COVID-19 pandemic. A key theme of Oberman’s letter focused on concerns regarding recent rail service issues reported by some shippers, adding that it may relate to a broader trend of rail labor reductions over the last several years, coupled with the pandemic-driven furloughs and quarantines.