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FAQ: The Boxcar Cliff and the Need for STB to Reform Railcar Hire Rates

By Railway Supply Institute

Q: What is the Boxcar Cliff? 

A: The Boxcar Cliff refers to the anticipated sharp decline in the number of available boxcars due to age and attrition, with an insufficient number of new cars being manufactured to replace them. Data shows a 39% decline in the boxcar fleet since 2008, with an expected further reduction of 33% by 2030. 

 

Q: What is the issue with the current Default Rate mechanism for car hire rates? 

A: Established in 1994, the Default Rate mechanism has resulted in unnaturally low hire rates for boxcars—sometimes as low as 17 cents per hour for a car that costs over $150,000 to build. This has deterred investment in new boxcars because the rates do not offer a reasonable return on this capital-intensive asset. 

 

Q: Why haven’t the car hire default rates for boxcars kept pace with inflation? 

A: Even with cumulative inflation exceeding 80% over almost three decades, the Default Rate for the most common type of boxcars has not been adjusted accordingly. As a result, these rates have remained stagnant, exacerbating the shortfall in new investments and maintenance of the existing fleet. 

 

Q: What are the consequences if this trend of boxcar retirements continues? 

A: If the declining trend in boxcar availability continues, it will severely impact industries reliant on these for transportation, such as paper and lumber. Additionally, the shortage could shift transportation to roads, with estimates indicating that for every missed boxcar shipment, cargo must instead be transported by three trailer trucks, which adds to road congestion and increases transportation costs. 

 

Q: What are the proposed solutions to the Boxcar Cliff? 

A: Key proposals include revising the methodology for setting default rates—specifically, making periodic updates to the default rates of existing cars and changing the formula to be based on the prior quarter’s mean paid hourly and mileage rates for comparable cars (including TTX). These changes aim to provide incentives for investment in new and existing boxcars. 

 

Q: How can stakeholders engage with the Surface Transportation Board (STB) on this matter? 

A: Stakeholders, including shippers and railcar leasing companies, can petition the STB to revisit the regulations under Ex Parte No. 334, urging revisions to the car hire default rate rules. This action can be taken considering the STB’s jurisdiction over transportation by rail carriers and car service rules, alongside their mandate to encourage investment and efficient use of freight cars.  

 

For more information contact the Railway Supply Institute, or directly engage with the STB through formal channels such as public comments, filings, and participation in open hearings or workshops. 

 

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