In May 2019, the Surface Transportation Board (STB) held two full days of hearings (a “754 proceeding”) with the class 1 railroads and shippers of all size including the scrap recycling industry. During these hearings, the STB probed whether certain rail practices and demurrage had gone too far and were imposing undue burdens on American shippers and industry.
The STB explored some possible solutions including restoring some credit days. They also pursued several common service issues including bunching of railcars, unreliable car delivery, and other excessive charges to move shipper’s railcars to and from storage. The STB was also interested in how Precision Schedule Railroading (PSR) was forcing manufacturers to change their operations and/or build out additional track to satisfy the railroads.
On January 1, 2019, the railroad industry imposed PSR and was able to reduce or remove credit days for system and private railcars. The railroads also imposed significant demurrage charges to improve efficiency. However, the rail service hasn’t improved and the demurrage charges have resulted in astronomical monthly demurrage bills, sometimes 10 or 15 times the amount of demurrage form the previous year. Most rail shippers protested these charges and the STB investigated these practices. (Not all Class 1 railroads have adopted PSR).
Following the demurrage hearings, ISRI was able to reopen the STB proceeding to focus on revoking the rail exemption for certain commodities including ferrous scrap. ISRI strongly supported the 2016 STB proposal arguing that the railroads had market dominance over the scrap recycling industry.
Subsequently, ISRI was able to meet with the STB as an ex parte participant in the process. ISRI followed-up with 30 such meetings over a two week period in June 2019; ten ISRI members met with each STB Board Member to describe the adverse impacts of the railroads’ demurrage policies. ISRI members also argued that the industry needs the revoked rail exemption reinstated to provide a more level playing field with the railroads. ISRI has also met with U.S. senators to keep them informed about the impacts of poor rail service and demurrage charges.
ISRI members explained to the STB that the economy, as well as transportation services, have dramatically changed since the rail exemption was adopted in 1996 to avoid the significant delays in filing tariff schedules. For instance, there are fewer Class I railroads in existence today than in 1996. Trucks are not an option for longer hauls because of cost – especially with electronic logging, driving regulations limiting distances, and a significant shortage of truck drivers. Since 1996, the manufacturing base for steel has shifted away from legacy areas as secondary steel production has moved to places such as North and South Carolina, Alabama, Arkansas, and Texas. However, existing scrap recycling facilities have adapted by using rail to ship ferrous scrap to these new steel mills and foundries. The ferrous scrap recycling industry is heavily dependent on rail service to both receive and ship ferrous scrap to its customers. Most steel mills prefer, or will only accept, ferrous scrap in rail gondolas.