Reciprocal switching

[MP173]

Ok kenneo, just a few more questions, if you dont mind.

So, post Staggers required each movement to be local rates with individual billings. That would have been an adminstrative nightmare for Mr. or Ms. Shipper to manage, even in the era of computers. I can certainly see why shippers wanted the mergers, even if it did reduce competition - what a balancing act that must have been.

So, today...you run private fleets of cars with lets say the above mentioned HFCS moving all over the US, but primarily to repeat customers. Tanks come back empty. Does the railroad charge for the return of the MT's? Usually, what are those charges? So much per mile?

I see in the tariffs "switching charges". How are those accessed.

Lets say that theorically, I am moving from my plant in Decatur on one day 15 tank cars going to 15 locations. Is there a switching charge to pickup those cars or is that part of the line haul rate? Is there volume discounts for shipping multiple cars to one location? For instance, if instead of the 15cars/15 locations there were 15 cars/1 location. Lower rate? It seems as if there should be but I do not know or understand the economics of loose car railroading.

Thanks for your help...interesting subject to me.

ed

[kenneo]

MP173

Your questions start in paragraph 3. You used to have (pre-Staggers) X-Line rates (mileage + weight&charges on Private Line cars (UTLX for example)), weight&charges PPD (prepaid), weight&charges CL (collect), weight&charges 3rd party, and unit-train. All of the above could either be Local or Interline.

Then came Staggers and everything became a local rate. You came to an interchage point (say Portland) and a new bill and charges had to be made. Say the SP brought the car from Mudflat by the Sea to Portland for interchage to the UP which was to take it to Kansas City for the NW which was to take it to Norfolk, VA ..... the shipper had to tender a shipping order to each railroad involved, each road made its own waybill, each road mad its own freight bill, and the customer had to write that many checks. Everything had to be prepaid --- no collect or 3rd party payee. The rates suddenly became such that if Mudflat by the Sea was within truck-compettive costs from Portland, the UP would send UP Trucking down to collect the shipment and transload at Portland and thus cut the SP out of the business. The Rate Bureaus were put out of business (which could be said to be a very good thing, but they did provide stability and price equity and enough ROI to say that such a thing existed.).

Needless to say, this did not go over well after a while, so the "secret" contract rate structure came into being. Now the customer is not stupid, and the railroads shot themselves full of holes again when the customers contracted down the rates to where the railroad had a real hard time breaking even, let alone making their full costs or any ROI.

How is it now? I have been away from it for long enough I don't know. But I do know that a certain amount of the old Rate Bureau type combination through rates have been reinstituted to regain business that was run off by the Staggers changes. Reciprocal switching districts have been a part of this. (Can you believe paying $550 line haul charge for a $150 switch job?)

Private car lines (cars that have an "X" as the last letter in their reporting marks) pre-Staggers charges were a mileage rate based on hauling the car around empty and a weight and charges rate based on the cost of hauling the loaded car around. Commodity did not play into the rate as it did with all other forms of shipment by rail. If it cost $50 per hundred to tow the car between A and B, that was the charge for the empty move and then an additional $50 for each 100 pounds loaded in the car above its light weight for the return move. But usually, a mileage rate was used for the empty car portion of the rate (x cents per mile) and then the weight and charges rate based on the mileage rate for the loaded move.

If you have never done this sort of thing, it can get real confusing real fast.

Paragraph 4 --- yes to all unless the car is moving on a combination rate and then yes, no.

[MP173]

Kennco:

Thanks for the explanation. I am not at all confused. I worked for 10 years as a Pricing/Marketing Manager for an LTL trucking company so tariffs are still something I am familiar with and terms such as "combination of rates" I understand.

I correlate LTL trucking to the loose car aspect of railroading. Both are similar in that you have terminals for pickup and delivery and line haul. In LTL trucking we had a pretty standard form of interchange and division of revenue, which actually was based on old railroad base rates.

I am curious in today's market how the pricing is handled. Does each railroad develope rates for customers based on specific movements (say Decatur, Il to Atlanta Ga for high fructose corn sweetner) or are there mileage rates in affect ( such as 1000 miles at $2000/car, 1100 miles @ 2150/car, etc?

Are there interchange agreements in place for railroads for all of their traffic, or does each potential movement have to have a specific agreement of rates and division of revenue?

I find the commondities, rates, and logistics of railroading far more interesting that the locomotives and scenery.

thanks for your help and please jump inwith more if you can.

ed

[kenneo]

All above are correct. In large terminal areas, such as Chicago, or St. Louis, or Portland, OR., where many roads come together end to end and particularly where most/all of the industries have only single line service, there is what is known as a switching district for rate and billing purposes.

This district usually is the same as the yard limits of each road, but also could extend into road-switcher served areas. Each road would, therefore, reciprocate in spotting the other roads cars at their exclusive industries.

For example, prior to BN, at Portland you had the SP, SPS, UP, NP and GN all operating into terminal yards in Portland. Say the SPS brought in a grain car for a feed mill at SP's Brooklyn yard - the SPS would hand the car to the SP, which would spot and pull the car for a fee paid by the SPS. The SP would keep the Demurrage and Storage charges. Except for the demurrage charges, the customer would get one bill for the move which would include the charges for the switch move whether those charges were absorbed by the SPS (the usual method) or passed onto the customer as a line item charge. What this did, in effect, was enable all rail customers in the Portland Reciprocal Switching District to be directly served by each road entering that district no matter who did the actual switching.

If that same feed mill was outside the reciprocal switching limits, the SP would get a line haul division of the through rate if a through or combination rate existed or move the car on a local waybill with the charges in addition to the SPS freight bill. The customer, here, would get two bills for the same car - one from the SPS and one from the SP for a local bill move and one bill from the SPS for a through move.

Confused?

[jcavinato]

Interline movements involving line haul were negotiated as "divisions" of the freight charge. A reciprocal switch was/is in one of two forms: a) either just a flat fee for very short distance movements at the start or end off the total move, or b) a fee the shipper/receiver would not see and was settled between the carriers at the end of the month -- I'll move some for you in this terminal area, you move some for me, and at the end of the month we'll settle up.

Agents were driven to route interline moves as far as they can on their own line, with the rationale being that their line would get more of the total split. At the B&O, moves coming out of Toledo and going to Birmingham would be routed B&O - Cincinnatti to St. Louis, Southern the rest of the way. What this agent didn't know is that the B&O/Southern division had them each getting the same split whether the Toledo-Birningham hand over was at Cin, St. Louis, Louisville, or Potomac Yard. Made no difference. But , the B&O made money on the Cin handover, but lost money form the movement if it took place anywhere else.

Did anyone ever accuse the rail tariff systems of being logical?

[PNWRMNM]

Whether or not the line haul carrier absorbs the switch charge is stated in the line haul carrier's tariff. The line haul carrier usually will absorb for dompetitive reasons, but not always.

Mac

[MP173]

I just spent an hour or so looking at the CN 9000 series tariff. A couple of decades ago tariffs were my career, so it was interesting to take a look at rail tariffs as opposed to motor carrier's.

Can anyone help me with the concept of reciprocal switching. For instance, the tariff showed Decatur, Il. with inbound cars of grain or soybeans with a reciprocal switching charge of $129.00 per car.

Decatur Il has ADM and Staley's, both huge processors of grain. Carriers serving Decatur include CN (IC), NS, CSX, and a shortline or two. Does the receprocal switching charge mean that on a car originated say by NS or CSX but going to a CN switched plant that the thru rate applies with the switching carrier receiving $129.00? Does the switching carrier receive a portion of the line haul also?

Is the switching charge absorbed into the line haul charge or added to it?

Thanks,

ed