World Trade - January 2009 - (Page 34)

TRANSPORTATION upheld by the 8th U.S. Circuit Court of Appeals—of what is commonly referred to as “the bottleneck case.” Because of the long distance nature of freight moves by rail, it is often necessary for more than one railroad to provide interline service from origin to destination, and in such cases the shipper is charged a joint or proportional rate. In the Bottleneck case, shippers wanted to break up through-movements into pieces so they could combine a rate for the shorter, bottleneck portion with a rate set by head-to-head competition for the longer non-bottleneck segment. In 1999, the Surface Transportation Board sided with the railroads and that decision has stuck ever since. Steven Eames, who heads up the U.S. arm of Dubai-based Jafza International, which is now buildBNSF ing its ﬁrst logistics park in North America on 1,300 acres in central South Carolina, also believes the free market will not deliver the rail the country currently needs. “The free market worked a century ago as rail helped the United States expand westward, but today access to ports and short track opportunities are used by Class 1 railroads to exclude their competitors,” he said. To break the monopoly, Eames suggested that quasistate entities like the Virginia Port authority or South Carolina Public Rail take over short track and switching operations near their respective ports. “These short rail operations would be expensive, and would necessarily have to be subsidized by the government and the ports to be competitive, but they would allow for an equal handoff to the long haul Class 1 rails for market access using their different networks,” he said. In an effort to achieve at least a measure of these aims, Consumers United for Rail Equity (CURE) is supporting Baldwin’s effort to re-regulate the railroads, and a second bill that would revamp the surface transportation board, making it more proactive in its supervision of railroads, particularly when it comes to setting rates. But to Tom White, assertions that the railroad’s are not covered by federal anti-trust legislation is “pure ﬁction.” “The industry is as prohibited from collusion in setting rates and otherwise restraining trade as anyone else,” he said. “The only type of exemption that exists is in cases where two railroads do a joint move, and that so that the customer doesn’t effectively pay twice for the same move.” A breather from the cargo surge, but only a breather “They felt as long as shippers were similarly situated, they weren’t disadvantaged,” he contends. Szabo said the unintended consequences of such a view—consequences deepened by deregulation—was that the federal government failed to see that some shippers—those who were effectively “captive’ to one service provider—were disadvantaged by the realities of the industry. “You see, one of the presumptions Congress made back in 1980 was that if you got government out of the way, the railroads would develop the system the nation needs,” he said. “The reality is that when you get government out of the way, railroads will develop the system they need to maximize proﬁts” He contends that many shippers assumed that if the new short line rail roads that took over many of these lines crossed the tracks belonging to multiple Class 1 railroads, they’d have a choice of who to ship with. In reality, the contracts leasing the tracks to the short lines effectively prohibited the shippers from doing business with anyone but them. “In anti-trust language this is considered a paper barrier,” Szabo said. “There’s no physical barrier to your using a competing rail line, but the ﬁnancial constraints are such that you have no choice.” Adding insult to injury, he said, is that as the railroads have become more powerful, they’ve shifted an increasing amount of their costs onto the shippers. This past summer’s fuel surcharges are one example, but Szabo said shippers have also been forced to bear the costs for additional rail cars and of creating additional sidings and loading facilities. Equally galling to critics of the freight rail industry was the Surface Transportation Board’s ruling—later 34 WORLD TRADE JANUARY 2009 Despite the current economic headwinds associated with the recent ﬁnancial meltdown, U.S. freight volumes

Table of Contents Feed for the Digital Edition of World Trade - January 2009

World Trade - January 2009 Contents Supply Chain Finance Conference: The Right Stuff at the Right Time! Is the Dollar's 'Exorbitant Privelege' as the Global Standard at Risk? Supply Chain Watch Tradewinds The Rise of the 4PL An Evolving Tech Backbone Makes 4PL Service More Effective The Changing Landscape of U.S. Railroads Intermodal Grows Up Port of Hamburg Grows as Distribution Point to Eastern Europe Outsourcing Without Fear Measuring the Carbon Footprint

World Trade - January 2009

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